Mastering Advanced Charting Techniques

Welcome back traders to the fourth installment of this masterclass series where I'm turning you into a resilient profitable trader rather than a copy and paste losing robot. And today we are going over advanced charting principles, things such as Elliott waves, Fibonacci, box theory, and other stuff that's going to help you project the future movements of an asset class or price action. Projecting or predicting, building a guide for yourself is so important because a lot of you guys are trading right now and you're just reacting. things. You see a support zone and you buy, but you have no clue as to how long that move is expected to last. Believe me, there are expectations, but you are missing them because you don't understand some of these concepts to a better guide your trade to see not only how long it's going to go for, but also where you can expect it to stop. And in other words, a lot of you guys are throwing the ball and closing your eyes. You don't have any idea where that's going to land. And if you know where it's going to land, you can take profits when you're supposed to, and also hold for the breaks when you're supposed to. eliminating room for error and ultimately becoming more profitable. So without further ado guys, hope you guys enjoy. So the first thing we have to do is understand why it's so important to predict, to project or estimate the future price movements of a stock. I see a saying going around the trading community a lot that says, as traders we do not predict, we react. And I honestly believe that this statement is just completely false. Because what you're saying is that you want to be late to every single piece of information that comes your way. And to me, that's a losing formula. While you do want to react to the pieces in front of you, you also need to be building an estimation, a prediction, a projection of future price action for the future. And there's several ways we can do this technically by just looking at the charts. By building an estimation or expectation, rather, projection, all those words can be interchanged for price action in the future or the move of a stock. What we can do is better trade. We can have more of a game plan. Then if we veer off the path of expectations towards pure speculation, if you pull up a chart and just randomly buy calls or puts because you quote unquote feel like it, that is speculation not based on expectations and you are statistically going to lose more. So the first tool we are going to be talking about today is Elliott waves. Now this is a somewhat tricky concept to master. It does take a lot of practice to get down Elliott waves, but this is one of the most accurate forecasting predicting methods of projecting future price action movements in the market. So what is Elliott waves? And let's just talk a little bit about that. Elliott waves is a reflection of human behavior. So human in market behavior. So it is a reflection of human behavior. Okay. And the reason it's works is because humans react and they make decisions in very emotional markets, very similar to one another and very fearful markets or greedy markets. You can expect. That humans are going to behave the same. And this is what Ralph Elliott found when he invented Elliott waves is that in the most simplest form, this five wave cycle followed by a three wave correction is what appears most commonly in the market. And so this is going to be a tool we can use to project the future movements price action. Now I trade them much different from a lot of other people. So you're not going to be able to find this on any other YouTube video. So be prepared to write this stuff down. Now, first of all, we have to talk about the basics. What are each wave? What do they mean to the structure that we're looking at? And then we'll go and we'll draw some examples on the charts. But first of all, wave one, we have to talk about wave one. What is it? Well, it is an impulse wave. There are impulse waves and correction waves. Impulse waves simply describe the waves that are in the direction of trend. And there's three of them. There's one, three, and five. These are all impulse waves because they go in the direction of trend. Wave one specifically has some characteristics that we look out for. Oftentimes, it is the highest volume move of the area around it or even of the entire move itself. This is often a very high volume area. Likewise, it often gets a lot of negative news. When you get a big pump up like this, the wave one is often still filled with negative news. And most importantly, I'm going to highlight this in red. Wave one starts with an expansion. or gap. It has most of the time, 90% of the time, you will see it start with a gap, but you have to have some sort of expansion. Wave one cannot be some little pop and then drop right back down. It has to be a gap or some big expansion that broke a very key level in the markets and has begun that breakout. So these are all the things you want to look for in wave one. Most importantly being, of course, the expansion beyond the Level here the gap. Okay. Now that's wave one. Honestly wave one is very hard to catch a lot of the times It's just you never trade this one and you're always going to trade the rest. But look at this, right? Here, wave two, this is a correction wave. So a correction wave is a wave like this. We will highlight this screen. A correction wave is going to be wave two and wave four. We're gonna get into the characteristics of these here in a minute. But wave two has a very distinct characteristic to it in that most of the time, it is going to be a counter parallel. It is going to be some sort of parallel counter to trend. We talked about this in the last episode, but this is where you can expect a slowdown, a very controlled sell-off. And what you can expect is that wave two wipes out 60 to 70% of wave one's gains. So oftentimes this wave will wipe out around 60 to 70% of wave one's gain in a very controlled fashion. And lastly, it can not cannot break below wave one. If wave two breaks below wave one, you know you are not in an Elliott wave cycle anymore. Next, we have the third wave. This is often the longest. Now, there are some varying rules, you know, that wave three doesn't have to be the longest, but I like trading. This is where, again, you guys are going to see my perspective here throughout this masterclass series. I like to trade Elliott waves that have the longest wave three, and I will get to this, why that's so important in a minute. Wave 3 is the longest wave it just can't be the shortest the rule is it can't be the shortest but i like trading elliott waves where wave 3 is the longest wave that is what i like to trade and this matters for the later parts of the elliott wave and how we trade them but this is typically how i prefer to trade them so i'm just going to put my name next to it and that way you know that's how i like it now the rule is it cannot be the shortest okay so technically it cannot be the shortest that is the technical rule but again i like preferring it just being the longest in general and this is the most explosive most explosive and hardest wave to trade i kind of lied one more thing is that wave 3 has an inverse relationship with wave 1 excuse me wave 5. what this means is that if you have a short wave three, a shorter, again, I still like it to be the longest wave. But if you have a shorter wave three than normal, you can expect a longer wave five than normal. And if you have a longer wave three than normal, you can expect a shorter wave five than normal. But again, I still like this wave to be the longest. Even though that's not the textbook rule, I still like wave three to be the longest. Now, wave four, this one is interesting. Most of the time, Wave 4 will form some sort of box or some sort of triangle in the markets. I'm going to draw a little triangle here. And this is important because, well, you can identify it very easily based off of these kind of structures. So it's going to form some sort of triangle, some sort of wedge, something like that. But as far as where it corrects to, wave 4 cannot correct to the top of wave 1. It cannot break the high of this level right here. And oftentimes it retraces 50% of wave three or to the 38.2% fib level. And this is often where you see a lot of positive news come in. In the macro, positive news will pile into wave five. And this is why you often see, you know, the positive news drops. And then what the hell, Andy? You know, why is it dropping after such good news? It's because it's already finished its final leg. But most of the time, wave five, again. has an inverse relationship with wave three. I'll put it up here. Wave five has an inverse relationship with wave three. So if this is a shorter one than normal, then you can expect that was the longer one, right? But you will obviously know this relationship by the time three is done. So whenever you get those feelings and all of us have done it, even when I was a beginner, I did this all the time. When you see that big stock move and then you buy, it's often wave five. And that's where you instantly get reversed against is because a lot of emotions build up on wave five. that causes the top and the reversal from the overwhelming positive feeling of this stock So let's apply these principles to a chart and not only just a chart But one that I've traded and that I've predicted the market with almost to the exact scent check out this clip on trader TV here Yeah, so if you want to pull up my chart here, this is the magical chart. We said we adjusted this Magically last but this is still the thesis is still the same. We think that there's gonna be a bottom Coming into 340, 350s areas, we think there's still more downside here. So, of course, we were going to talk about Apple here later on. I know Sean was waiting for that. But we were short a lot of names. In software, you know, Apple, of course, some of the large caps, as well as some semiconductors like Pan W, we've been short. But overall, our thesis here, and I'm going to say it now, I believe that next Tuesday, you can quote me Tuesday, maybe Wednesday, if God isn't in my favor. But next Tuesday, I think personally, we are going to set a market bottom. Now, that doesn't mean it's going to be the end of the pain because we might have a bounce and a bounce back and retest the lows. But I think next Tuesday to Wednesday, we are going to set a bottom. And this means that we can open up. into early October looking at financial names. So looking at the banks, hammering the banks, Goldman Sachs, and some of those other names. We're also going to be looking towards mid-April where we're going to get, or excuse me, April, October, where we're going to get energy names like OIH and oil production names as well. A very specific timeframe there, Andrew, as far as the bottom of the market. Now from that clip, although it didn't show the Elliott waves, it played a huge part in me. Knowing what was gonna happen next you'll notice I said next Tuesday when this was filmed. It was on September 28th That said next Tuesday. I expect to be the bottom. I wasn't wrong. This was the technical bottom There's two bottoms in every bottom a technical and a liquidation bottom But the reason you know Although it didn't show it the reason I was so confident in the bottom being so near is Because we had already completed wave three almost we were just about to start way forward this strong clothes And I knew that if we excuse me this strong clothes right here I knew if we did pop here, this would be the start of wave four and that soon after we would get wave five, because again, we had a long way three. So shorter way five. So the end was near for this downtrend. And I knew this. So from a technical standpoint, although I did use things like seasonals, put walls to better time, both my 350 bottom and other data from a technical standpoint, this played a crucial role in me in predicting that bottom and trading it. Going back to kind of revisit this structure here. we can see some of these elements in these rules more clearly as you see in this example here wave one this is often the highest volume one so if we pull up a little volume indicator here you can see that this was a higher volume area than the areas around it additionally you had an expansion that gap wave one starts with that gap it absolutely has to and you can see that gap and push down here this is a classic wave one although you might not see it Without hindsight, of course, you will definitely see the wave two into the wave three. That is one of the most obvious structures of the Elliott wave cycle is that wave two to wave three transition. So looking back at this, you can see wave two, wave two. Again, what did we say? We said it wipes out around 60 to 70 percent of wave one gains and it cannot break the low of wave one or in the case of a downtrend, the wave high. So right here, this is perfect. Didn't break this and it wiped out 60 to 70 percent of games. gains before reversing back down. Great. Now that you get into this bigger move down, this is why we said it's one of the hardest to trade is because you're going to get a lot of these volatile explosions. You're going to get, you know, the very sharp reversals, the very quick gap downs that make trading very hard in here. That is why it's important to be involved in wave two into wave three and not so much trying to trade throughout wave three. Now you'll see as we come back down into wave three. three, the end of that way for right, we talked about a triangle, we talked about a box, either one, you want to look at it, this form sort of a box, it also forms somewhat of a, you know, right here, this was kind of a box, this was the ending of wave three, wave four, it was also kind of a triangle, right, there's some sort of triangle structure here. This is what you want to look from way for way four is most of the time going to be sideways, it's just a sideways wave. And this is exactly a reflection of that. And it gets more apparent on the smaller timeframes, you can see it's just literally chop, all the way back chop chop chop now the wave five this is where we're going to talk about the more important stuff wave five was this shorter wave right here and you can see it made a low it has to break the wave three obviously but the reason we want to have a longer wave three is that so wave five is shorter problem with everything in the markets is timing and when you have a shorter wave three than normal this was a considered a longer one so based off our rule this wave five should be shorter if this is longer. But the reason we want to have longer wave three is so we can expect a shorter wave five. A long wave five is extremely hard to time because it could go on and on and on. Because it's the last wave, you don't have any other checkpoints to gauge how long it's supposed to go into, right? Wave three, we can know it's over when we see a wave four. That's simple. But when you see a wave five go on and on and on, there's no other wave after that to verify whether it has stopped other than the correction waves, which are hard to identify. So the reason we like a long wave three is then we can expect a long, a short wave five. And that makes timing the reversal very easy. It also makes timing this last wave. Very, very easy because most of the time it's just on a new low, something like that. Okay, so that's why we want the longer wave three. And that's why I prefer to trade Elliott waves with a long where wave three is the longest, even though that's not textbook. I told you guys again, this is just how I trade them. This is how I find great success in them. And honestly, this is probably the easiest. Again, wave five. If you get into those really long wave fives, it's hell to trade. Absolute hell. Okay, so you got the five-wave sequence down. Now, there's this thing right here that hovers after. It's the three-wave corrective cycle. And this is the hardest thing about this cycle, is catching and identifying these three waves right here. It has similar rules to the five-wave cycle. So the first wave right here into the second wave. This one typically retraces about 50% of wave A. And additionally, it is the longest. wave. So the B leg is longest wave, not in necessarily direction or how much it moves, but in time is typically around 1.5 times around 1.1.5 X longer. It is about 1.5 times longer. It lasts. So if this is around, you know, uh, 10 candles, this would be about 15 candles in length. Okay. That is the 1.5 ratio there. and then it wipes out around 50% and then you get a retracement. Now, you'll come into this example and see that it was not the cleanest. And as much as you like to go, well, you know, where's the, you know, the biggest part with a lot of this Elliott Wave stuff is people get caught up in the timeframes. People get caught up in what is actually the ABC, etc. What's more important is you need to understand this concept. After you finish Wave 5, there's a correction. That's all you need to know. And that... In that correction, sometimes it's very ugly, so it makes drawing these ABCs very hard. But in that correction, you should understand that there is going to be a violent pump, a slowdown, and then another surge higher. What that looks like, it could look like a bunch of ugliness. Here, it's not a clean example of a wave. This was very short, very aggressive, and you still continue higher. But the main idea you should be looking for... Regardless of what rules you see online, whatever people tell you is that I need to see a pump, I need to see a drop, and then I can expect at least another high. That is the expectation after you finish wave five. Now again, I have to lay out some of these rules so that you understand them, but this doesn't always happen. Sometimes the ABCs are very quick, but the idea is that you just need to know the principle of after you liquidate, you can expect one leg higher. followed by a decline, followed by another leg higher. That is how we as traders make money. It is not in getting lost in the detail. It is not going through and going, you know, I don't know where an ABC is. That means it might go down. No, you have to trust that this was the liquidation that this is going to retrace after the initial big boom. And then you are going to get another leg higher at some point. Okay. That's how you should be trading. And by having that expectation that you've laid out. you have increased the odds of your next trade being profitable as far as what you're looking at. And I believe that's truly one of the hardest things with Elliott waves to understand is that Elliott waves still exist even when they're not there. Let me explain. Similar to that ABC, that technically might not be there, but the idea of a pump, retracement pump is still there. Similarly, you might not always get to draw a five wave cleanly on a very big move or something. But when the liquidation happens. you know, whether you, when you see liquidation happens, let's pretend like this wasn't a clean enough one to draw a clean five wave on. Like sometimes that happens. Sometimes it's very difficult to spot in that you can't really draw that. So let's just say we identify a liquidation regardless of whether we were able to actually identify the five wave correctly or not. Once we see a liquidation in the markets, we know there's going to be an ABC. Once we see an ABC, we know eventually there's going to be another five wave, right? You have to take the core concepts from it. When you finish whatever move you had here, you expect this. When you start a new move, you know, from a consolidation, you expect the five wave, at least to some extent, whether you can draw it or not, whether you're good at it, you're not is irrelevant. What you need to know is that these structures, and I hope I'm saying this correctly. So you understand, but these structures are there either way, whether you can identify them or not in that from those structures, we need to have the core ideas that. after the five fifth wave, you can expect an immediate reaction in the markets to the opposite direction. And one last thing to help with that, we will review this in a minute when we go over Fibonacci's, but when it comes to ABC corrections, it can look like a variety of different things. But what you want to see is that, is that ABC? does it retract no more by a great amount below that 50% if it holds above that or holds near it right under it whatever this is the a the B and the C that's what you want to expect so we're gonna use Fibonacci's with that but again this 50% mark right here is the key to identifying whether that is an ABC or not or whether it's just a little bounce before more downside now three other price action only concepts that we're going to talk about today that helps us project is box theory the Fibonacci levels and market maker cycles. These are all three very important things that you need to know to project the future outcome of the markets. Now, the first one we're going to talk about is market maker cycles. These are incredibly accurate at predicting the future of the markets and similar to just our last conversation about, you know, after things happen, you can expect one of two things. Well, this typically happens. You might notice this. It looks exactly like that last Elliott wave that I showed you. Well, this is a structure that happens all the time towards market bottoms, and it is a sign that a stock is prepared to move. And that once we see this structure form, we can accurately predict if the markets are going to go higher or lower or whatever. So we're just breaking down the structure real quick. Again, you'll see this nowhere else. This is not to be confused with accumulation and distribution necessarily. The traditional accumulation and distribution. are considered a chop, you get a spring in one direction, and then the move happens in the other. This is how they traditionally teach it. However, in today's modern age, with how the derivative market works and the inner workings with it, markets tend to fake out both sides rather than just one side now, because of how powerful the derivatives market is and how they need to balance it, they need to fake out both sides. So how it typically forms is you see some sort of channel, and then you see an initial channel form, then you see a spring. And the spring is this chop that happens on the upside. And then you'll get an instant plunge back down and you'll see max pain. Max pain is typically quicker than the spring. After that, you'll get a move right back into the channel. And then you'll see this. You're almost guaranteed. Almost. I can't say guaranteed because it's not. But you're almost guaranteed a move if it is a proper market maker style to at least above the spring high. Okay. So screenshot this image. because we're going to fly through some examples. And just over here, this was the same example we talked about was once I actually, now I didn't get to go on and talk about this, but once I saw this market maker cycle in play, it was wraps, but you can see right here, this was the market maker cycle. So you have the channel form, you have the spring to the upside, the max pain here, and this is your go signal that you are going to break at least the spring high for the bottom. And again, that was the ABC. You know, again, whether we draw it clean or not, it's the you know we expect a rebound at least there so that's a market maker cycle and then you'll go to another bottom and you'll see that these same principles apply right so something more may be like this where you have a bigger channel development you have a spring you have a max pain and then you move to break that high of the spring this is another example this spring max pain concept goes so long here's another example i traded i remember this one we had a channel form then we had a spring right here Here's the spring. Then we move down, max pain, come up, break the high of the spring, right? And our entries are somewhere within the middle of that. Here's another example. Although again, it might not be super clean, but here is another example. You have a spring, you have the channel, very loose channel. You're going to have to be creative in spotting these, but you had a spring, drop, max pain, come up, break the spring high and go. That is max pain. So how does this help us project? Well, when we see something like a spring happen. And then we see, you know, kind of a max pain happen. This idea of a spring and max pain helps us identify future movements of the stock. Now you have zero contesting liquidity on either side. So now it's going to move in the bias for these. Most of the time is to the upside. If it is a bearish market maker cycle, it will be the opposite. So you will see a quick move higher, followed by a slow chop down back into the range and then back down. But this helps us really identify. just the overall sentiment just following price action because we've taken out both sides of liquidity and that we did form this very precise structure that you will see a future move. And what targets does this give us? More specifically with projecting, when we do see that max pain, we can at least anticipate above the spring high. That's why it's considered a projecting, a forward-looking, forward outlook structure is because you get a target of at least the spring high mechanically. The next projection tool I want to talk about is actually box theory. So this is actually a pretty simple tool that you can use a little strategy and it doesn't take much effort at all. Whenever you see price action form a horizontal box, so something like this. And again, since this is distribution, you expect. spring but this is majority of the price action touches here that's what we try to do so you see a price action box like this box theory is a great way of projecting future targets just based off ratios similar to fibonacci's these are based off mathematical levels and again sort of that human behavior and when things become extended so what you want to do is when you see that price action box try to get as many touches on top and bottom as possible and once you do that you want to take that box and you're going to copy it 100% of that box. That is going to be your first target, this level here. Your second target, you're going to copy that box and you're going to make it around 75% of that original box. So I'd say right around there is a good guesstimation. And that will be your second target all the way down here from a breakout. And your final one will be 25 to 15% of that box. So I'm going to just do a fourth. So maybe something like this and that is going to be your final target so again all you're doing is copying once copying 0.75 and then copying 0.25 that's all you got to do for this and of course smaller the time frame smaller the targets but it still works so right here we have a decent sized box you have 100 this is your first target to the downside then you do 0.75 of that original box which is around here that is your second target and your third and final target is 25 percent that original box and that would be right here so this is an easy way to build an expectation of a breakout right if you say you short here again this goes back to why it's so important if you short here and close your eyes you wouldn't know that if momentum continues in your favor to target all the way down here because that's where the the deviations where the markets prefer to go that is what's going to happen is going to hit these different ranges so if you you know get out here why why are you doing that the the markets say you know as long as momentum's on your side to continue lower to these levels that is a good way of guessing this and again when i'm doing this i'm looking for flat boxes so something like this right this is a flat box as many touches on top and bottom as possible there's one here's the first copy then you go with the second copy which is going to be 0.75 of that which is around there and your final one which is 0.25 is something like that Now, moving on to Fibonacci, what are they and how do we use them? Well, they are pretty simple, but some people get caught up in mistaken on them. Fibonacci levels are a mathematical level. We've talked about deviations here before, you know, parallel channels being deviations. We've talked about some other mathematical levels such as box theory just now. Math relates heavily to price action because there are limits to price action in which certain reactions and certain things happen at certain points. And so. Fibonacci levels take advantage of these ratios and believe it or not, no matter, you know, people talk about, well, you drew your fibs wrong. You did all this wrong. It ultimately almost doesn't matter because these levels are always important to some degree. And so how we want to approach Fibonacci tools is just use trading view. And if you have an uptrend and you see a retracement and you start to see, you know, maybe even some sort of bounce, then you want to go and you want to draw your Fibonacci retracement tool. From this right here. So let's say I wanted to see what are my targets to the upside if this continues to break out from this Retracement from the high to the low. I'm just drawing it from the high to the low Well, if I want this to continue higher then I would say yeah, I would want to target here here here here, right? These are all levels now You'll notice if I mark those levels and I keep them there if I drew it say from here What do you notice? Well, these levels are basically the same Well, what if I drew it from even shallower, maybe right here? Well, you'll notice that somewhere around these levels are still important rejection points. So it doesn't always matter what you put down for the Fibonacci. What matters is you can get levels from them. The most advantageous place to use Fibonacci levels are like on the market right now. When you're all-time highs, there's very little, what do you call it, price action to reference. historical price action. There's no previous liquidity levels. And so on some of these dips, it's very important. I don't want to paste the wrong tool. On some of these dips, it's very important to throw on a fib and say, hey, look, if we do break out because we are at all time highs, what can I target? Well, I can target here. I can target here. I can target here. These are all sorts of things. Now, likewise, for the short side, if you thought the markets were going short, well, I could say something like this, right? So we have a drop, we have a pump. I could just do from the pump high to the pump low and I could say well you know in this time the Fibonacci's are facing downwards and in this case you just have these specific levels targeted these are all levels that you're not taking reversal trades off of, but these are checkpoints. Remember how we talked about momentum? They're checkpoints. Momentum is all that matters. So these should be checkpoints to see, hey, should I get out of the trade yet? Hey, should I get out of the trade yet? What's happening here? That's the idea behind fibs, but they're pretty simple. I mean, a lot of people get, oh no, you drew them wrong. But really, again, it doesn't matter whether you draw the levels from, you know, this low or this high to that high to that low. It doesn't matter. If I do this, hey, you'll see, yeah, we rejected there. But also if I do this, you'll see we also rejected here, but you'll see if I also do this we rejected here here and here Right. So these are always important levels. They go based off ratio So it doesn't matter where you draw them really but what matters is you draw them in the correct direction So what I try to do is whenever you see pullbacks just draw them from the high to low And whenever you want to see the short side draw it from maybe the bounce low to the bounce high And see what levels you can target to the downside there So hopefully now you guys can use price action to project using some of those tools to project set expectations and predict the markets better Now this was the fourth episode. The next episode of our series is going to be the final part about technicals We're going to sprinkle in technicals throughout but this is going to be the final part It's going to be around an hour long of me. Just charting things. You're going to see how I analyze You're going to see me going through all 11 plus indices as well spy qqq iwm charting all these making a game plan for the week as well as just practicing everything from drawing liquidity zones projecting using you know market maker cycles fibs uh box theory to set levels everything is going to be in that final video and then after that we're going to move to psychology real deep stuff options markets seasonals rotations everything else if you guys have not already signed up for the rate report i cannot stress this enough i'm the only dude who's willing to put my balls on the line my reputation to put my trades out there as how confident i am in my ability to trade i was raised as a trader i was put on this planet to trade and even just this example this week I formed my entire game plan this week around this one option flow order, which was a hedge, which told us to buy the dips. You can read it right here, pause the video, but this told us to buy the dips this week. And that's exactly what happened. That's what we executed on. But if you miss this one order, you wouldn't have caught this idea because of how powerful the options market is, which we should get into later in this series. Additionally, if you do want to apply to the private trade group, there's applications on my Instagram story. We only let three people in each month. It's pretty professional. It's also very exclusive and it's going to be a lot of hard work. but it's a lot of professional data and a lot of connections. Links are all down below. Thanks so much for showing up and I'll see you in the next one. Bye-bye.

things. You see a support zone and you buy, but you have no clue as to how long that move is expected to last. Believe me, there are expectations, but you are missing them because you don't understand some of these concepts to a better guide your trade to see not only how long it's going to go for, but also where you can expect it to stop. And in other words, a lot of you guys are throwing the ball and closing your eyes. You don't have any idea where that's going to land.

And if you know where it's going to land, you can take profits when you're supposed to, and also hold for the breaks when you're supposed to. eliminating room for error and ultimately becoming more profitable. So without further ado guys, hope you guys enjoy. So the first thing we have to do is understand why it's so important to predict, to project or estimate the future price movements of a stock.

I see a saying going around the trading community a lot that says, as traders we do not predict, we react. And I honestly believe that this statement is just completely false. Because what you're saying is that you want to be late to every single piece of information that comes your way. And to me, that's a losing formula. While you do want to react to the pieces in front of you, you also need to be building an estimation, a prediction, a projection of future price action for the future.

And there's several ways we can do this technically by just looking at the charts. By building an estimation or expectation, rather, projection, all those words can be interchanged for price action in the future or the move of a stock. What we can do is better trade. We can have more of a game plan.

Then if we veer off the path of expectations towards pure speculation, if you pull up a chart and just randomly buy calls or puts because you quote unquote feel like it, that is speculation not based on expectations and you are statistically going to lose more. So the first tool we are going to be talking about today is Elliott waves. Now this is a somewhat tricky concept to master.

It does take a lot of practice to get down Elliott waves, but this is one of the most accurate forecasting predicting methods of projecting future price action movements in the market. So what is Elliott waves? And let's just talk a little bit about that. Elliott waves is a reflection of human behavior. So human in market behavior.

So it is a reflection of human behavior. Okay. And the reason it's works is because humans react and they make decisions in very emotional markets, very similar to one another and very fearful markets or greedy markets. You can expect. That humans are going to behave the same.

And this is what Ralph Elliott found when he invented Elliott waves is that in the most simplest form, this five wave cycle followed by a three wave correction is what appears most commonly in the market. And so this is going to be a tool we can use to project the future movements price action. Now I trade them much different from a lot of other people.

So you're not going to be able to find this on any other YouTube video. So be prepared to write this stuff down. Now, first of all, we have to talk about the basics.

What are each wave? What do they mean to the structure that we're looking at? And then we'll go and we'll draw some examples on the charts.

But first of all, wave one, we have to talk about wave one. What is it? Well, it is an impulse wave.

There are impulse waves and correction waves. Impulse waves simply describe the waves that are in the direction of trend. And there's three of them. There's one, three, and five.

These are all impulse waves because they go in the direction of trend. Wave one specifically has some characteristics that we look out for. Oftentimes, it is the highest volume move of the area around it or even of the entire move itself.

This is often a very high volume area. Likewise, it often gets a lot of negative news. When you get a big pump up like this, the wave one is often still filled with negative news.

And most importantly, I'm going to highlight this in red. Wave one starts with an expansion. or gap. It has most of the time, 90% of the time, you will see it start with a gap, but you have to have some sort of expansion.

Wave one cannot be some little pop and then drop right back down. It has to be a gap or some big expansion that broke a very key level in the markets and has begun that breakout. So these are all the things you want to look for in wave one.

Most importantly being, of course, the expansion beyond the Level here the gap. Okay. Now that's wave one.

Honestly wave one is very hard to catch a lot of the times It's just you never trade this one and you're always going to trade the rest. But look at this, right? Here, wave two, this is a correction wave.

So a correction wave is a wave like this. We will highlight this screen. A correction wave is going to be wave two and wave four.

We're gonna get into the characteristics of these here in a minute. But wave two has a very distinct characteristic to it in that most of the time, it is going to be a counter parallel. It is going to be some sort of parallel counter to trend. We talked about this in the last episode, but this is where you can expect a slowdown, a very controlled sell-off.

And what you can expect is that wave two wipes out 60 to 70% of wave one's gains. So oftentimes this wave will wipe out around 60 to 70% of wave one's gain in a very controlled fashion. And lastly, it can not cannot break below wave one. If wave two breaks below wave one, you know you are not in an Elliott wave cycle anymore.

Next, we have the third wave. This is often the longest. Now, there are some varying rules, you know, that wave three doesn't have to be the longest, but I like trading.

This is where, again, you guys are going to see my perspective here throughout this masterclass series. I like to trade Elliott waves that have the longest wave three, and I will get to this, why that's so important in a minute. Wave 3 is the longest wave it just can't be the shortest the rule is it can't be the shortest but i like trading elliott waves where wave 3 is the longest wave that is what i like to trade and this matters for the later parts of the elliott wave and how we trade them but this is typically how i prefer to trade them so i'm just going to put my name next to it and that way you know that's how i like it now the rule is it cannot be the shortest okay so technically it cannot be the shortest that is the technical rule but again i like preferring it just being the longest in general and this is the most explosive most explosive and hardest wave to trade i kind of lied one more thing is that wave 3 has an inverse relationship with wave 1 excuse me wave 5. what this means is that if you have a short wave three, a shorter, again, I still like it to be the longest wave. But if you have a shorter wave three than normal, you can expect a longer wave five than normal. And if you have a longer wave three than normal, you can expect a shorter wave five than normal.

But again, I still like this wave to be the longest. Even though that's not the textbook rule, I still like wave three to be the longest. Now, wave four, this one is interesting.

Most of the time, Wave 4 will form some sort of box or some sort of triangle in the markets. I'm going to draw a little triangle here. And this is important because, well, you can identify it very easily based off of these kind of structures. So it's going to form some sort of triangle, some sort of wedge, something like that.

But as far as where it corrects to, wave 4 cannot correct to the top of wave 1. It cannot break the high of this level right here. And oftentimes it retraces 50% of wave three or to the 38.2% fib level. And this is often where you see a lot of positive news come in.

In the macro, positive news will pile into wave five. And this is why you often see, you know, the positive news drops. And then what the hell, Andy?

You know, why is it dropping after such good news? It's because it's already finished its final leg. But most of the time, wave five, again. has an inverse relationship with wave three.

I'll put it up here. Wave five has an inverse relationship with wave three. So if this is a shorter one than normal, then you can expect that was the longer one, right? But you will obviously know this relationship by the time three is done.

So whenever you get those feelings and all of us have done it, even when I was a beginner, I did this all the time. When you see that big stock move and then you buy, it's often wave five. And that's where you instantly get reversed against is because a lot of emotions build up on wave five. that causes the top and the reversal from the overwhelming positive feeling of this stock So let's apply these principles to a chart and not only just a chart But one that I've traded and that I've predicted the market with almost to the exact scent check out this clip on trader TV here Yeah, so if you want to pull up my chart here, this is the magical chart. We said we adjusted this Magically last but this is still the thesis is still the same.

We think that there's gonna be a bottom Coming into 340, 350s areas, we think there's still more downside here. So, of course, we were going to talk about Apple here later on. I know Sean was waiting for that. But we were short a lot of names.

In software, you know, Apple, of course, some of the large caps, as well as some semiconductors like Pan W, we've been short. But overall, our thesis here, and I'm going to say it now, I believe that next Tuesday, you can quote me Tuesday, maybe Wednesday, if God isn't in my favor. But next Tuesday, I think personally, we are going to set a market bottom.

Now, that doesn't mean it's going to be the end of the pain because we might have a bounce and a bounce back and retest the lows. But I think next Tuesday to Wednesday, we are going to set a bottom. And this means that we can open up. into early October looking at financial names. So looking at the banks, hammering the banks, Goldman Sachs, and some of those other names.

We're also going to be looking towards mid-April where we're going to get, or excuse me, April, October, where we're going to get energy names like OIH and oil production names as well. A very specific timeframe there, Andrew, as far as the bottom of the market. Now from that clip, although it didn't show the Elliott waves, it played a huge part in me. Knowing what was gonna happen next you'll notice I said next Tuesday when this was filmed. It was on September 28th That said next Tuesday.

I expect to be the bottom. I wasn't wrong. This was the technical bottom There's two bottoms in every bottom a technical and a liquidation bottom But the reason you know Although it didn't show it the reason I was so confident in the bottom being so near is Because we had already completed wave three almost we were just about to start way forward this strong clothes And I knew that if we excuse me this strong clothes right here I knew if we did pop here, this would be the start of wave four and that soon after we would get wave five, because again, we had a long way three.

So shorter way five. So the end was near for this downtrend. And I knew this.

So from a technical standpoint, although I did use things like seasonals, put walls to better time, both my 350 bottom and other data from a technical standpoint, this played a crucial role in me in predicting that bottom and trading it. Going back to kind of revisit this structure here. we can see some of these elements in these rules more clearly as you see in this example here wave one this is often the highest volume one so if we pull up a little volume indicator here you can see that this was a higher volume area than the areas around it additionally you had an expansion that gap wave one starts with that gap it absolutely has to and you can see that gap and push down here this is a classic wave one although you might not see it Without hindsight, of course, you will definitely see the wave two into the wave three.

That is one of the most obvious structures of the Elliott wave cycle is that wave two to wave three transition. So looking back at this, you can see wave two, wave two. Again, what did we say? We said it wipes out around 60 to 70 percent of wave one gains and it cannot break the low of wave one or in the case of a downtrend, the wave high.

So right here, this is perfect. Didn't break this and it wiped out 60 to 70 percent of games. gains before reversing back down. Great. Now that you get into this bigger move down, this is why we said it's one of the hardest to trade is because you're going to get a lot of these volatile explosions.

You're going to get, you know, the very sharp reversals, the very quick gap downs that make trading very hard in here. That is why it's important to be involved in wave two into wave three and not so much trying to trade throughout wave three. Now you'll see as we come back down into wave three. three, the end of that way for right, we talked about a triangle, we talked about a box, either one, you want to look at it, this form sort of a box, it also forms somewhat of a, you know, right here, this was kind of a box, this was the ending of wave three, wave four, it was also kind of a triangle, right, there's some sort of triangle structure here. This is what you want to look from way for way four is most of the time going to be sideways, it's just a sideways wave.

And this is exactly a reflection of that. And it gets more apparent on the smaller timeframes, you can see it's just literally chop, all the way back chop chop chop now the wave five this is where we're going to talk about the more important stuff wave five was this shorter wave right here and you can see it made a low it has to break the wave three obviously but the reason we want to have a longer wave three is that so wave five is shorter problem with everything in the markets is timing and when you have a shorter wave three than normal this was a considered a longer one so based off our rule this wave five should be shorter if this is longer. But the reason we want to have longer wave three is so we can expect a shorter wave five.

A long wave five is extremely hard to time because it could go on and on and on. Because it's the last wave, you don't have any other checkpoints to gauge how long it's supposed to go into, right? Wave three, we can know it's over when we see a wave four. That's simple.

But when you see a wave five go on and on and on, there's no other wave after that to verify whether it has stopped other than the correction waves, which are hard to identify. So the reason we like a long wave three is then we can expect a long, a short wave five. And that makes timing the reversal very easy. It also makes timing this last wave. Very, very easy because most of the time it's just on a new low, something like that.

Okay, so that's why we want the longer wave three. And that's why I prefer to trade Elliott waves with a long where wave three is the longest, even though that's not textbook. I told you guys again, this is just how I trade them. This is how I find great success in them.

And honestly, this is probably the easiest. Again, wave five. If you get into those really long wave fives, it's hell to trade. Absolute hell.

Okay, so you got the five-wave sequence down. Now, there's this thing right here that hovers after. It's the three-wave corrective cycle.

And this is the hardest thing about this cycle, is catching and identifying these three waves right here. It has similar rules to the five-wave cycle. So the first wave right here into the second wave. This one typically retraces about 50% of wave A. And additionally, it is the longest.

wave. So the B leg is longest wave, not in necessarily direction or how much it moves, but in time is typically around 1.5 times around 1.1.5 X longer. It is about 1.5 times longer.

It lasts. So if this is around, you know, uh, 10 candles, this would be about 15 candles in length. Okay. That is the 1.5 ratio there. and then it wipes out around 50% and then you get a retracement.

Now, you'll come into this example and see that it was not the cleanest. And as much as you like to go, well, you know, where's the, you know, the biggest part with a lot of this Elliott Wave stuff is people get caught up in the timeframes. People get caught up in what is actually the ABC, etc. What's more important is you need to understand this concept.

After you finish Wave 5, there's a correction. That's all you need to know. And that...

In that correction, sometimes it's very ugly, so it makes drawing these ABCs very hard. But in that correction, you should understand that there is going to be a violent pump, a slowdown, and then another surge higher. What that looks like, it could look like a bunch of ugliness.

Here, it's not a clean example of a wave. This was very short, very aggressive, and you still continue higher. But the main idea you should be looking for... Regardless of what rules you see online, whatever people tell you is that I need to see a pump, I need to see a drop, and then I can expect at least another high.

That is the expectation after you finish wave five. Now again, I have to lay out some of these rules so that you understand them, but this doesn't always happen. Sometimes the ABCs are very quick, but the idea is that you just need to know the principle of after you liquidate, you can expect one leg higher. followed by a decline, followed by another leg higher.

That is how we as traders make money. It is not in getting lost in the detail. It is not going through and going, you know, I don't know where an ABC is.

That means it might go down. No, you have to trust that this was the liquidation that this is going to retrace after the initial big boom. And then you are going to get another leg higher at some point. Okay.

That's how you should be trading. And by having that expectation that you've laid out. you have increased the odds of your next trade being profitable as far as what you're looking at.

And I believe that's truly one of the hardest things with Elliott waves to understand is that Elliott waves still exist even when they're not there. Let me explain. Similar to that ABC, that technically might not be there, but the idea of a pump, retracement pump is still there. Similarly, you might not always get to draw a five wave cleanly on a very big move or something. But when the liquidation happens.

you know, whether you, when you see liquidation happens, let's pretend like this wasn't a clean enough one to draw a clean five wave on. Like sometimes that happens. Sometimes it's very difficult to spot in that you can't really draw that.

So let's just say we identify a liquidation regardless of whether we were able to actually identify the five wave correctly or not. Once we see a liquidation in the markets, we know there's going to be an ABC. Once we see an ABC, we know eventually there's going to be another five wave, right? You have to take the core concepts from it. When you finish whatever move you had here, you expect this.

When you start a new move, you know, from a consolidation, you expect the five wave, at least to some extent, whether you can draw it or not, whether you're good at it, you're not is irrelevant. What you need to know is that these structures, and I hope I'm saying this correctly. So you understand, but these structures are there either way, whether you can identify them or not in that from those structures, we need to have the core ideas that. after the five fifth wave, you can expect an immediate reaction in the markets to the opposite direction.

And one last thing to help with that, we will review this in a minute when we go over Fibonacci's, but when it comes to ABC corrections, it can look like a variety of different things. But what you want to see is that, is that ABC? does it retract no more by a great amount below that 50% if it holds above that or holds near it right under it whatever this is the a the B and the C that's what you want to expect so we're gonna use Fibonacci's with that but again this 50% mark right here is the key to identifying whether that is an ABC or not or whether it's just a little bounce before more downside now three other price action only concepts that we're going to talk about today that helps us project is box theory the Fibonacci levels and market maker cycles. These are all three very important things that you need to know to project the future outcome of the markets.

Now, the first one we're going to talk about is market maker cycles. These are incredibly accurate at predicting the future of the markets and similar to just our last conversation about, you know, after things happen, you can expect one of two things. Well, this typically happens.

You might notice this. It looks exactly like that last Elliott wave that I showed you. Well, this is a structure that happens all the time towards market bottoms, and it is a sign that a stock is prepared to move.

And that once we see this structure form, we can accurately predict if the markets are going to go higher or lower or whatever. So we're just breaking down the structure real quick. Again, you'll see this nowhere else. This is not to be confused with accumulation and distribution necessarily. The traditional accumulation and distribution.

are considered a chop, you get a spring in one direction, and then the move happens in the other. This is how they traditionally teach it. However, in today's modern age, with how the derivative market works and the inner workings with it, markets tend to fake out both sides rather than just one side now, because of how powerful the derivatives market is and how they need to balance it, they need to fake out both sides. So how it typically forms is you see some sort of channel, and then you see an initial channel form, then you see a spring. And the spring is this chop that happens on the upside.

And then you'll get an instant plunge back down and you'll see max pain. Max pain is typically quicker than the spring. After that, you'll get a move right back into the channel. And then you'll see this. You're almost guaranteed.

Almost. I can't say guaranteed because it's not. But you're almost guaranteed a move if it is a proper market maker style to at least above the spring high. Okay. So screenshot this image.

because we're going to fly through some examples. And just over here, this was the same example we talked about was once I actually, now I didn't get to go on and talk about this, but once I saw this market maker cycle in play, it was wraps, but you can see right here, this was the market maker cycle. So you have the channel form, you have the spring to the upside, the max pain here, and this is your go signal that you are going to break at least the spring high for the bottom.

And again, that was the ABC. You know, again, whether we draw it clean or not, it's the you know we expect a rebound at least there so that's a market maker cycle and then you'll go to another bottom and you'll see that these same principles apply right so something more may be like this where you have a bigger channel development you have a spring you have a max pain and then you move to break that high of the spring this is another example this spring max pain concept goes so long here's another example i traded i remember this one we had a channel form then we had a spring right here Here's the spring. Then we move down, max pain, come up, break the high of the spring, right?

And our entries are somewhere within the middle of that. Here's another example. Although again, it might not be super clean, but here is another example. You have a spring, you have the channel, very loose channel. You're going to have to be creative in spotting these, but you had a spring, drop, max pain, come up, break the spring high and go.

That is max pain. So how does this help us project? Well, when we see something like a spring happen.

And then we see, you know, kind of a max pain happen. This idea of a spring and max pain helps us identify future movements of the stock. Now you have zero contesting liquidity on either side. So now it's going to move in the bias for these. Most of the time is to the upside.

If it is a bearish market maker cycle, it will be the opposite. So you will see a quick move higher, followed by a slow chop down back into the range and then back down. But this helps us really identify. just the overall sentiment just following price action because we've taken out both sides of liquidity and that we did form this very precise structure that you will see a future move.

And what targets does this give us? More specifically with projecting, when we do see that max pain, we can at least anticipate above the spring high. That's why it's considered a projecting, a forward-looking, forward outlook structure is because you get a target of at least the spring high mechanically. The next projection tool I want to talk about is actually box theory.

So this is actually a pretty simple tool that you can use a little strategy and it doesn't take much effort at all. Whenever you see price action form a horizontal box, so something like this. And again, since this is distribution, you expect.

spring but this is majority of the price action touches here that's what we try to do so you see a price action box like this box theory is a great way of projecting future targets just based off ratios similar to fibonacci's these are based off mathematical levels and again sort of that human behavior and when things become extended so what you want to do is when you see that price action box try to get as many touches on top and bottom as possible and once you do that you want to take that box and you're going to copy it 100% of that box. That is going to be your first target, this level here. Your second target, you're going to copy that box and you're going to make it around 75% of that original box. So I'd say right around there is a good guesstimation. And that will be your second target all the way down here from a breakout.

And your final one will be 25 to 15% of that box. So I'm going to just do a fourth. So maybe something like this and that is going to be your final target so again all you're doing is copying once copying 0.75 and then copying 0.25 that's all you got to do for this and of course smaller the time frame smaller the targets but it still works so right here we have a decent sized box you have 100 this is your first target to the downside then you do 0.75 of that original box which is around here that is your second target and your third and final target is 25 percent that original box and that would be right here so this is an easy way to build an expectation of a breakout right if you say you short here again this goes back to why it's so important if you short here and close your eyes you wouldn't know that if momentum continues in your favor to target all the way down here because that's where the the deviations where the markets prefer to go that is what's going to happen is going to hit these different ranges so if you you know get out here why why are you doing that the the markets say you know as long as momentum's on your side to continue lower to these levels that is a good way of guessing this and again when i'm doing this i'm looking for flat boxes so something like this right this is a flat box as many touches on top and bottom as possible there's one here's the first copy then you go with the second copy which is going to be 0.75 of that which is around there and your final one which is 0.25 is something like that Now, moving on to Fibonacci, what are they and how do we use them?

Well, they are pretty simple, but some people get caught up in mistaken on them. Fibonacci levels are a mathematical level. We've talked about deviations here before, you know, parallel channels being deviations. We've talked about some other mathematical levels such as box theory just now.

Math relates heavily to price action because there are limits to price action in which certain reactions and certain things happen at certain points. And so. Fibonacci levels take advantage of these ratios and believe it or not, no matter, you know, people talk about, well, you drew your fibs wrong. You did all this wrong.

It ultimately almost doesn't matter because these levels are always important to some degree. And so how we want to approach Fibonacci tools is just use trading view. And if you have an uptrend and you see a retracement and you start to see, you know, maybe even some sort of bounce, then you want to go and you want to draw your Fibonacci retracement tool.

From this right here. So let's say I wanted to see what are my targets to the upside if this continues to break out from this Retracement from the high to the low. I'm just drawing it from the high to the low Well, if I want this to continue higher then I would say yeah, I would want to target here here here here, right?

These are all levels now You'll notice if I mark those levels and I keep them there if I drew it say from here What do you notice? Well, these levels are basically the same Well, what if I drew it from even shallower, maybe right here? Well, you'll notice that somewhere around these levels are still important rejection points.

So it doesn't always matter what you put down for the Fibonacci. What matters is you can get levels from them. The most advantageous place to use Fibonacci levels are like on the market right now. When you're all-time highs, there's very little, what do you call it, price action to reference. historical price action.

There's no previous liquidity levels. And so on some of these dips, it's very important. I don't want to paste the wrong tool. On some of these dips, it's very important to throw on a fib and say, hey, look, if we do break out because we are at all time highs, what can I target? Well, I can target here.

I can target here. I can target here. These are all sorts of things. Now, likewise, for the short side, if you thought the markets were going short, well, I could say something like this, right? So we have a drop, we have a pump.

I could just do from the pump high to the pump low and I could say well you know in this time the Fibonacci's are facing downwards and in this case you just have these specific levels targeted these are all levels that you're not taking reversal trades off of, but these are checkpoints. Remember how we talked about momentum? They're checkpoints.

Momentum is all that matters. So these should be checkpoints to see, hey, should I get out of the trade yet? Hey, should I get out of the trade yet? What's happening here? That's the idea behind fibs, but they're pretty simple.

I mean, a lot of people get, oh no, you drew them wrong. But really, again, it doesn't matter whether you draw the levels from, you know, this low or this high to that high to that low. It doesn't matter.

If I do this, hey, you'll see, yeah, we rejected there. But also if I do this, you'll see we also rejected here, but you'll see if I also do this we rejected here here and here Right. So these are always important levels. They go based off ratio So it doesn't matter where you draw them really but what matters is you draw them in the correct direction So what I try to do is whenever you see pullbacks just draw them from the high to low And whenever you want to see the short side draw it from maybe the bounce low to the bounce high And see what levels you can target to the downside there So hopefully now you guys can use price action to project using some of those tools to project set expectations and predict the markets better Now this was the fourth episode.

The next episode of our series is going to be the final part about technicals We're going to sprinkle in technicals throughout but this is going to be the final part It's going to be around an hour long of me. Just charting things. You're going to see how I analyze You're going to see me going through all 11 plus indices as well spy qqq iwm charting all these making a game plan for the week as well as just practicing everything from drawing liquidity zones projecting using you know market maker cycles fibs uh box theory to set levels everything is going to be in that final video and then after that we're going to move to psychology real deep stuff options markets seasonals rotations everything else if you guys have not already signed up for the rate report i cannot stress this enough i'm the only dude who's willing to put my balls on the line my reputation to put my trades out there as how confident i am in my ability to trade i was raised as a trader i was put on this planet to trade and even just this example this week I formed my entire game plan this week around this one option flow order, which was a hedge, which told us to buy the dips.

You can read it right here, pause the video, but this told us to buy the dips this week. And that's exactly what happened. That's what we executed on. But if you miss this one order, you wouldn't have caught this idea because of how powerful the options market is, which we should get into later in this series.

Additionally, if you do want to apply to the private trade group, there's applications on my Instagram story. We only let three people in each month. It's pretty professional. It's also very exclusive and it's going to be a lot of hard work. but it's a lot of professional data and a lot of connections.

Links are all down below. Thanks so much for showing up and I'll see you in the next one. Bye-bye.

Transcript for:Mastering Advanced Charting Techniques

Transcript for:
Mastering Advanced Charting Techniques