Effective Trading Strategies and Patterns

I'm going to take you right now. I'm going to take you to being right over 80% of the time in the direction. Let me repeat this right now. What I'm going to cover is going to make you 80% or better winner, which means that out of every 10 trades. you on average get eight of them right. Do you know what you can do with those type of numbers? You can get fabulously wealthy by being right 80% of the time. Some of the best mechanical or algorithmic trading models make millions of dollars and they have a 38% winning ratio. It's just that when they win, it wins big. 38%. I'm giving you something in this section that's going to give you 80%. It's going to be very powerful. What separates a master from a novice or from even a regular profitable trader, I'm talking about a masterfully profitable trader, is their directional probability. If you get the direction right, you can kind of mess up other things and still be okay. A bull and bear 180 and what i consider to be a color change which in a sense is a miniature bull and bear 180. so let's quickly cover what a bull 180 is first just to refresh your memory here so here this is this is one of your cards all right it is a fairly solid red bar right that is immediately followed by an even more powerful and solid green bar that supersedes the high of the red bar. So now the key to this event, guys, is that, you know, the key to the event is the amount of green in each bar. So you can have sort of like wicks on either end, but the vast majority of the bar is body. So the vast majority of the green bar is green, not tails. And the vast majority of the red bar is body or red, the color red and not just wicks or anything like that, right? The other thing about the Bull 180 is that the two bars should be hefty. So we know that the green bar is bigger and taller and heftier, but the red bar is not small. The red bar is sizable, right? The red bar is formidable. and that's very important to understand now when you so this is by far the most powerful event in your deck of cards you will never find something more powerful than the bull 180 okay so out of all your actionable events this ranks at the top for the most power so we have a much smaller red bar it's for its size it's hefty too it's just smaller and then you have a smaller green bar but it too is hefty what do i mean by hefty meaning that the vast majority of the bar is still body this is what i call a color change which is which has significance but this is a monster color change. That's the Bold 180. One is more regular and one is more hefty. The quality of either of these is really determined by the red bar, not really the green bar. That's an interesting thing to note. It's the quality of the red before the green. So as an example, Take a look at this, okay? This could be considered this kind of bar, but it doesn't matter. It's the red bar that really determines which one of these it is. And because the red is not hefty, then it must be the color change. Does that make sense, guys? If the red is small, If the body is rather small, then it's, even if the green is tall, it's still considered a color change. It's not a Bull 180. What makes a bull or bear 180 is the first bar. So if we take all of this in reverse, right, and we do something like this, right? So we do green bar first, red bar second, boom, there is your bear 180. And then we do this, green bar. And boom, red bar. That's a color change even though the red bar is hefty, really big and hefty, right? Because the bar, the first bar determines which one it is. Bear 180 is here. Color change is here. Make sense, guys? Make sense? You got it? Okay, good. Now, which one is this? One or two? That's right, it's one, because the green is tall and hefty, not small. Okay, from your bull 180, which one is this? One or two? One being bold, 182 being color change, right. Good. Beautiful. And this as well. This as well. All of these are color changes. Some people have confusion with the wicks, all right. So if a body like this, right, if it has a wick. that's too tall what does that become guys what is that called is this a topping tail bar is that one a topping table no that's just a little wick so there should be no confusion regarding tails guys if the tail gets long enough it becomes something else right yes you got that if your tail be is big enough it becomes something else so a 12 year old would say that's a big tail and that's a little tail and adults will say but how what percentage of a little tail versus the big tail makes it a little tail is it 10 you know that that's more of the adult mindset coming in so you can see it in jerry's question and not to tease you jerry it's just i do want everyone i want to catch everyone doing this right How strong is a color change compared to a Bull 180? Is it 80%, 70%, 50%? Guys, color changes are significant. They are buyable and sellable events. Bull 180s and Bear 180s are buy and sell events, but they are your most powerful buy and sell events. Let's say, for instance, you have... a rising 20 period moving average. Now the 20 period moving average is a location item. All right. The 20 MA is a location item. The 200 period moving average is a location item. Always remember this. These are location items. the reason why you need to to to understand this is because many people confuse these as an event item it is not these are not a events they are not event items they are location items let me give you an example so the trader would do this the trader is buying a falling knife right there there's This is not an event, but the trader blindly buys there, confusing the 20 period moving average as the event itself versus the location at which you need to see an event. Do you guys follow the difference between location and event? Got it? If you do, let me know. All right. You just don't. buy something because it's near the 20. You need an event at or near the 20, okay? but this can just keep searing through okay all right so that's the difference between a location item and an event item okay now the 200 halt you're under the 200 boom you get above the 200 there's some height we pull back Boom! An event happens right there. That's the 200 MA halt. So what I'm teaching you is kind of an event location concept, where if you combine one of your events with this starting from below to now above and halt, Wow! Take a look at this guys. We get above the 200, we get some height, we pull back, and we get, boom, the color change. Now what makes this one so special? This is extra special, but why? It's a 200 MA halt, but it's also the 20 period moving average retest at the same time, in the same location. Wow! So guys, you see how you can start stacking odds in your favor by how much lines up at the same point, right? Without the 20 being there, that's awesome. With the 20 there, it's more awesome. This is also what some of you are referring to here. This is also the situation where your stock is trapped between an overhead. flat 200 and a rising 20 and i've taught you in the past that usually in that scenario it's the rising moving average that wins so the 20 often wins by pushing it above if you get that successful retest plus an event boom now remember don't be like the traders that just buy you falling knives into these this one worked but you need an event you need a color change you need a bottoming tail bar you need a bow 180 you need a red bar takeout this is a red bar takeout by the way this event here is a red bar takeout it's just a delayed color change right that's all a red bar takeout is it's just delayed it didn't happen this bar it happened some subsequent bar later you So here you are below, you get above, you gain some distance, you gain some height, you pull back, and boom, a bottoming tailbar forms. Boom, a bottoming tailbar forms. So there's your halt, and you kind of have it here. You're under, you get above, you pull back, and you're bottoming tailbar. Now, this is an interesting one because this brings out a nuance that I'm very glad it's bringing out. Remember that the moving averages are more like zones or fences that you can lean on. They're not really skinny lines. So this is sort of pressing up against the fence, right, but not necessarily breaking. So here's how you judge whether or not it's bending or breaking. This is bending but not breaking. Let me tell you how. It's simple. If your trigger entry point is above the item, it's bending it. So where do you buy above this tail bar right there? If your entry is above the item, it's bending the item. Like boxing ropes, a boxer can bend the ropes without breaking the ropes. Does that make sense? If your entry is under the 20, it broke it. If it's above above the 20 it didn't break it all right and so that's how you judge that so you see some people say but oliver this broke the 20 no it didn't break the 20 that's just bending the 20 your entry above this tail is there your entry above that tail is there boom guys this is this is very very powerful because this will give you right this concept will give you you The ability to capture trend changes like a professional. so oftentimes your stock is doing this right and your 20 is doing this and then you know you're you're you'll you'll get something like this and you're boom now some people buy that first one mistake you see that that first one is a mistake it's rarely the first break you understand you have to see you have to see well is the next pullback successful uh oh let's see boom right there now that event happens a color change or something and now right there you have caught the potential trend change you've caught the beginning of something that could be in enduring that could be monstrous. Gardner says I was making this mistake earlier in the week. Yes, the first one is rarely the one, guys, but the successful pullback after the first one. Let's do the reverse of this. Let's do the reverse of this. Boom. A lot of people will try to short back. Wrong. It's rarely the first crack. Do you understand? It's the retest. Wait a minute. Let's see. Uh-oh. Here's the 20MA halt on the reverse side. Boom! Event right there. Now that's your potential short. what okay what event is this guys color change or bear 180 you see how simple that was what's this only works in the past bear 180 color change i don't really even care what you call it guys because they're both events they're both you have to dive into both right is the location good yeah costa yes beautiful what is this What is that bar called? Elephant bar. Okay. This is the full market cycle, right? So look at your full cycles, right? That's one. Here's another. But sometimes they're wider, right? The cycles can be shorter, wider. It depends. So when you're dealing with this, like look at where your cycle change is happening, your trend change. is happening so you drop and the 20 starts halting right to the other side which means that you have started this side of the cycle yes and now we're what part of the cycle are you when you see you see sometimes the bottom of the cycle and the top are sharp so you get this Sometimes they're flat like that. Sometimes they're sharp. This one's flat. This one's sharp. This is the up cycle. This is the down. This is the up. Sharp. This is the down. Sharp. This is the up. Sharp. This is the down. Flat. There's only one cycle. I've taught you that over and over again. You can't trade. someone else's experience. I give you my experience, but you can't trade my experience. So then what do you do with it? You have to make that experience your experience. It has to stop being my experience. You see, in my experience, when you get a solid red bar takeout, near the 200, it's a buy. Look at this. Red bar, takeout, near the 20. That's my experience. I have given you that. It is my experience that when a bottoming tail bar gets taken out near the 200, it is a buy. That is my experience. It is my experience that a color change near a 200 is a buy. That is my experience. But you can't trade my experience. You can only understand my experience. So my experience becomes knowledge for you. But knowledge is not enough. I'm going to repeat that. My experience shared with you becomes knowledge. It does not become experience for you. It becomes knowledge for you. This is a very powerful concept, guys. But it is the same concept as what I explained to you when we started the session. Remember I told you that fat green bars shoot their power to the right and serve. This area serves as support. So when... if you were to drop into this area, there is likely a bounce out of that area, right? So we discussed that, and Exxon is still going, okay? This concept, this is the micro version of that concept, but this is... the macro version of it. Let's put make this one move to the upside. It's on a slant a little bit. This is one powerful move. This is the macro version of what I just drew for you. This is the macro version of what I just drew for you. Now this whole move shoots its power to the right meaning that any pullback into it will ultimately in most cases be caught checked subdued and a new move to new high is very likely This is the single bar version of that concept. And this is the macro move version of the same concept. Put the high of something negative to shame. That's the key. Does your move put the high of something negative? to shame the pullback is viable that's what i want you to know and that can be even in a bear market because this move cracks the back of the bear all right now take a look at this green bar here That green bar is shooting its power to the right, creating a force field. And look, you bounce out of there. Now, take a look at this green bar, which shoots its power to the right. And look, you... Bounce out of there. You bounce out of there. You see? And that's the micro versions. And the macro version. If, remember the three moving averages. 8, 13, 20. If your pullback breaks all three, there is not going to be a whale. Now, I can't say that 100% of the time, but it's best to assume 100% of the time there is no whale. Some of you understand that. If, I'm going to repeat it again. If your pullback breaks all three, The next pullback will be shallow most of the time and do something like that. There will be no whale. Guys, the value of this is priceless. You can't put a number on stuff like this because 99.9% of the people out there have no way of judging and knowing these little nuanced but very powerful things. No one has. the ability to read the future. Providence, in all of his wisdom, has not given us the ability to read so very far in front of our nose. This is something very important to understand, right? And so, guys, while no one really has the ability to read the future, not even me, of course, what we can do is come up with things that potentially can happen and prepare for those things. What we can do is assess the probability of something happening. All right. And prepare for that. But we can't actually ever know. So the way you deal with the future is to deal with it through probabilities and to have a variety of scenarios, highly probable scenarios mapped out for what might happen. And then have specific strategies to take advantage for each one of those scenarios that you've mapped out. What's the best way to get a mature whale? it is using a moving average and a the big bar concept so there's a combination called m a moving average big bar combo all right moving average big bar combo so what you do is once you get the whale you have the whale here Now, you're going to, maybe you take some off. You had two. This goes to one. You're going to leave one in for the possibility of a mature whale. You're now going to use moving average. Let's say the 20 in this case. Okay. And the big bar concept. So from this point on. right here do this here like this you're going to do moving average and you're going to ignore what the what the stock is doing until there's a sizable bar boom now you drop it to the sizable bar When the moving average passes or improves on your stop of the big bar right there, now the moving average stop is tighter than your big bar stop. You convert to the moving average until the next big bar happens. Boom. And the big bar will happen before your moving average is present. Moving averages are delayed items. Do you understand? So the big bar happens beef when the moving average is here So now your stop shouldn't be here your stop should drop to here until that moving average catches up and improves on the stop and And the next time you adjust is when you get a big bar. There is no big bar, no big bar, no big bar. Stay with the 20, no big bar, no big bar, no big bar. And you're riding this out. So take a look at if we were to do this the whole way, all right? So if we were to do this the whole way, you're moving average, big bar. then right there no you're no you're actually big bar and then look big bar and then big bar and then moving average so your big bars happen before the moving average can improve on the big bars You guys got that? So you can see it, big bar moving average is here. So which one is a better stop? The big bar. Then the next big bar happens and my moving average is there. Which is the better stop? The big bar. Then the next moving big bar happens here and my moving average is there. What's the best stop? Big bar. Then the moving average crosses the big bar stop. Now you've converted or flipped to the moving average, moving average, waiting for the next big bar, but staying with the moving average and there's no big bar. So you stay with the moving average. That's beautiful. And that combo gets you all the way, I would say to here. Wow. You got that? The moving average big bar concept. The moving average big bar combo is how you ride out your mature whales. Do you have that? Do you understand that? Do you get that combo? Big bar moving average. Big bar moving average. Big bar moving average. Few of you let me know. Let me know. You got it? All right, good. Now, it is important. Two bar stop, it's your choice. One bar stop, two bar stop, it's your choice. That is your choice. I always tell you that when you are rich, rich people in this world have choices. They have more choices than poor people. When you are in leg two of a whale, you are rich. Which means that you have choices. You want to do a two bar stop? Fine. You want to do a one bar stop? Fine. You want to do a backflip? Fine. You want to do a cartwheel? Fine. You want to break out in song? Fine. You're rich. It's the way it is. I don't make the rules. Just the way it is. All right. Um, so now that we know how to... maximize a mature whale right there are a couple other things i want to point out you don't do this combo on leg one i'm going to repeat that you do not do a trailing stop combo on leg one this only is in whale you complete territory this is whale complete territory right there now you bring the combo in you do not do a trailing stop on leg one a trail why because the the pullback is going to take you out of the trade if you were doing a if you were doing a big bar combo here like okay moving so i enter here all right now my stop is here now my my next stop is a big bar look at how you get taken out of the trade leg one is not for trailing your stop only leg two is for the combo all right please remember that leg two this is leg one interrupted by the pullback very important okay it's only for maximizing the whale complete zone okay There is one other thing I want to point out and then we're done. Okay. The other thing I want to point out is which moving average do you use? Because it's not always the 20 period moving average. So there are three possible moving averages you're going to use. This, you should take notes on this. If you are not familiar with this, you should take notes on this. There's the eight. the 13 and the 20. All right. These are your three trailing moving averages. We have as a default, the 20 period moving average right there, but that is sometimes not the appropriate moving average to do your trail with. So which one do we choose? I'll explain. Your pullback reveals which one you choose. So let's put all three moving averages on the chart. And whichever one the pullback does not break is your moving average. Okay? So if we put the 8, if we put the 8-period moving average on the chart, alright? i'm going to put this here remember it's the 8 the 13 or the 20. if we put the 8 on it when doing this here we put the 8 on it i'm going to change that to the 8 we can clearly see do that with a different color that the pullback breaks the 8. So it's not the 8. So boom. If we put the 13 on it, that breaks it too. So which moving average does it not break? It's the 20. You got it? It's the only one of the three that it didn't break. Tell me you understand this. That's how you find out what moving average do I use for the big bar moving average combo. First thing, right, that's a nothing bar, right? But the second bar is interesting in that you have almost two perfect red bars. Now you guys should already know what can you do with these when they're back to back like that. You can combine them. Back to back near perfect bars can be combined, right? Back to back near perfect bars can be combined. I see something really nice there. So yeah, you got in on the second bar, which is cool. Take this second. The first color change, if you like here. Prophet. Prophet. Walk down. Where would the stop be? I would do max. I wouldn't be doing the bars. I told you that the the the the FAT4 is your help so try to get above that. So yeah the second bar would be okay or max would be okay. Um the walk down is pretty simple. Break even. All right. I'm okay moving to that pivot there. From here onward, from here onward, what's your best option for walking this down? You tell me. Not just moving average. Right, the combo, right? The moving average big bar combo. Right? So you do this. Now I would say that 13 can be used here. So now you're moving averaging, okay big bar, and then the moving average crosses. You're back to moving average and then big bar. Moving average crosses, but here you see how this accelerates away? That's when I get out. Does that make sense? Accelerate away from that moving average. Gotta take profits on that. Right? Or as we start accelerating away, you can just start bar by barring out. Or here you start, oh whoa, I'm accelerating bar by bar out. Yep, sometimes you get scared of it snapping back on you. Yeah, but that's what the big bar stop is going to prevent from happening. You see, as long as a stock can't take out its big bars, it ain't snapping back. You understand? So this is the greatest sign that your trend is healthy. Big bars are not even flirted with. There's not even a flirting of a big bar. there's no move back up into the bar's range there's no stalling it is red bar and follow through for the most part um and the other thing is when your railroad tracks break so if you look at your 13 and you look at your stop here it's almost like this parallel like until here where it breaks sharply. That breaking sharply, now you can really snap back. If anything I teach you to do on the 2 is applicable on the 5 as well, yeah, you can do it on the 5. Very slow motion trade, but yeah, that moving average would have to be tighter on the 5 though. So you'd go to the 8. But same thing. here uh when you use 13 versus 8 based on the pivot right so i'll show you so if we take the if we take this away is your 20 relevant no how do we know if a moving average is relevant that the pauses and pullbacks come near it doesn't have to touch but whatever one it's coming near to is the relevant one. So you've got three choices 20, 13, 8. Nothing is coming near to your 20. So it must be the next one down. I can tell you right now the 8 is crossing it. That seems very clear to me that it's not the 8. So Boom! Now we're coming near and it doesn't have to touch. It just can't be too much space between. I know I'm looking at a five, but I want to show you using the five, this concept. You see how in the latter part of yesterday, XOM is rising. Do you understand? This means that this gap is breaking this, which gives it higher odds of running, continuing. This is an igniting gap. All right. That's an igniting gap. Igniting gaps can run as opposed to an exhaustion gap. An exhaustion gap would be. Late day Exxon drops, closes near the low, and then gaps here. So it's almost like it's one last fell swoop to continue what was going on. This is an exhaustion gap. It's oversold in most cases. This... is an igniting gap which means that it's just starting a brand new direction. So you should be aware of which gap, if your stocks are gapping, what gaps are they? Are they continuing what the latter part of the day was doing? Or is the gap changing something? Does this make sense? So yeah, these things can give you a decent little edge with your gap scenarios. Now, think of it in terms of people, right? Think of it in terms of people, guys. Like, if my stock has been running into the close, traders who hold overnight, there's millions of them, guys. Traders that hold overnight, they're in profit. from at least the latter part of the day. Then the next morning they don't even have to suffer through the stock moving up there over time. They get the extra gain without any effort instantly. Think of what this does to their profitability from the first second of the day. This is what creates the traders who may have gotten in here. It creates an instant profit-taking opportunity. That's why it's an exhaustion gap, which a lot of times reverses itself. Here, the traders... are hoping that the market's closed now the traders are hoping that it opens here but instead it opens there now look at the gain that was lost that they had understand and this can follow through as they don't want to lose this part. So they start selling. Does that make sense? See the gain and see the loss. Now they start selling not to lose the rest. You know, after the first minute, yeah, you can get in that's early. There's a lot of minutes in the day. If you're getting in after the first minute, that's still super early. It's not necessary to improve on simple moving averages. It's not necessary to tweak them. It's not necessary to gain an additional edge. None of that's necessary, mainly because moving averages are an area. And that's the first thing I want to talk to you about today. These are basic, but very powerful things. I need you to revisit and get yourself reacquainted to. Moving averages are areas. That's the first thing I want you to understand. Let's say I have a 20 period moving average here. All right. That's a 20 period moving average. Now, that's not that moving average in reality is not a skinny line. That moving average is a zone. So it has a little zone above it. and it has a little zone beneath it so in a in a way the moving average serves as the vertebrae that runs through the 20 period moving average zone it's sort of like the spine of the 20 period moving average the chart only shows you the spine it doesn't show you that the body that the spine supports the chart when you put the 20 on there is only showing you the spine. It's not showing you the body. The body of the 20 period moving average is more like represented by the yellow that I've drawn here. So there's a difference between bending a moving average like the 20. This would be like bending the moving average, bending, but not breaking. The other concept regarding moving averages is that they lead. the way most of the time, not 100% of the time, but a vast majority of the percentage of the time. So let's say 85% of the time, let's use that number. I don't know exactly what it is, but it's more or less 85 percent 85 percent of the time you sh the 20 period moving average in particular leads the way which means that you should be trading in the direction of the 20 period moving average so if your 20 print moving average is pointing or trending upward your play should be upward not downward i would say that the vast majority of traders losses are due to breaking this rule not that there are exceptions but when you make it a practice of trading against the 20 period moving average you're already swimming upstream you've already got gravity and nature and nature's laws working against you all right When you try to find a buy in Roku here just because there's green, when you try to find a buy here, you are fighting nature. You're fighting all the laws of the universe. That's concept one. Concept two, we should be trading in the direction of the 20-per-moving average the vast majority of the time. So when you're betting down. The color game is simply when does red eliminate green? Boom, right there. This green is eliminated right at that point. Boom, okay? When does this green cluster? Here's a green, here's a green. I'm sorry, here's a green. When does green get eliminated by red? Right there. Boom! Wait a minute. Here's green. When does this green get eliminated by red? Right there. So let's find all the points. Here, here, here. Do you see the color game? Red takes out green. Red takes out green. Red takes out green. Do you see that? So we've got three concepts here, right? We've got, let's write them down. We've got moving averages are zones. They're not skinny lines to trade with. to 20 ma at least 85 of the time boom here we go again and three color game with 20 ma is your key to consistent profitability. The very best location to play the color game is at or near the 20 period moving average. It's not the only location. I am just saying it is the best location. So concept four. at or near the 20 ma as an example is best it's not the only it's best now as you can see roku here these entries are not near the 20 but that is because it's power trending and when it's when when it's power trending, you must go to another moving average. And so your 20 gets replaced by something like the 8. So now your 20 has been substituted by a power trend moving average. And so now It's still at or near, but instead of the 20, it's the 8, which can serve as a replacement for the 20 during power trends. Do you understand this? Do you see a rising 20 color game play? Do you see it? Yeah, you see it? Boom. Red gets taken out there. This is the bar that did it. That's your stop. This is your risk unit. And the rest is history. Rising 20. Here is green taking out red. Here is green taking out red. Do these qualify as being at or near a rising 20 period moving average playing the color game at or near a rising 20 MA? Yes, it does. Always look at your risk unit. Hany is saying that he has experienced that when he places the stop under the bar that is eliminating red, that he gets stopped out all the time. Well, has any of these symbols been stopped out? Let's take a look again. Here's the bar that eliminates. Here's your stop. Nope, not there. Here's the stop. Eliminate it. Nope, okay. But eliminate it here. If you do a one bar stop. So we got one. Okay. Two for one. HD. Let's track this. Boom. Here's your stop. Nope. Here's your stop. Nope. Here's your stop. No. Violation stop. Nope. What about here, though? No. What about here? Remember I told you that the 20 print moving average is a zone. You see that? Don't interpret that as a break. Remember that's concept number one. You're dealing with a zone, not a skinny line. Is this near the 20? Yes, because it's near the zone, not the skinny line. You see? that's concept number one don't forget the concepts don't forget the concepts it's a fence it's boxing ropes it's a trampoline it's a mattress it's not a skinny line that's concept one now when it comes to the low of the bar i you i would perf for you revert to the wider stop of the pivot if you have one so do you see how here is your bar that you're buying but you you can do the low here that's not wrong but if you you'll give it a little bit more room below the pivot better You see, if you come in here, you can go here. It's not technically wrong, but a little bit extra under the pivot is better. If you go in below this green here, you can use this bar, but giving it a little bit more above the pivot is better. In this case, right, the bar is the top of the pivot. Is this the color game? Yes. Remember, it's a zone. It's not a skinny line. What about this? Is that the color game with your stop there? Yes. Okay. You get it. In your narrow state, if you get an elephant or a tail bar. that forms anywhere above the narrow state. Now, these can be touching a little bit. It doesn't matter. But as long as they're above the narrow state, above the items, above the 20, above the 200, if you get that any of these two bars form there, your direction is... Very high probability up, up from here, up from there, up from there. All you have to do is wait for one of your two bars to form in the right location. And there's only, on the buy side, there's only three locations. Well, there's only really two locations because this is the same as this. So we can take this one away. There's only two locations. where buying is appropriate, right above a narrow state and below a wide state. Now, remember, here we're playing the color game off the 20, a color game off the 20. That's different. But we're talking about the best locations to start your trades from. There's really only two, one, two. Okay, now the best. trick the best location to short or play down is narrow state under or wide state all right so there's only two best locations to short from and there's only two best locations to go long from color game in between but again today i wanted to focus on the most powerful locations okay this is getting your directional trading right now guys take your cell phone out take a freaking snapshot of this take your whatever image capture screen capture do something Hold this out, stick it on your freaking computer, stick it on your freaking refrigerator, stick it on your bathroom mirror, stick it on the headboard of your bed, stick it on your freaking keyboard, stick it on your desk, make freaking wallpaper. Do what you gotta do to sear this into your mind. Because this can serve as the check. When you're ready to do something, you better make sure you're ready to buy. Is it in one of these green spots? You're ready to short? Wait a minute. Let me check. Is it in one of these red spots? No, I'm not doing that. Let this be your guide. Do you understand? Keep a cut. Make it your screensaver in your phone. I don't. freaking tattoo tattoo your wife's forehead or your husband's forehead just so that it's a constant freaking reminder of where the best trades occur from should i say what i'm saying there's something else i want to point out here um i'm constantly reminding my mentorship traders that there's a tendency for stocks to do what I call is a double dip and you've got to be prepared for that. The double dip is a trap that gets a lot of traders. All right, it's this. A stop moves up, it pulls back very nicely. All right, so trader buys here. Boom, stop there. Moves up nicely. Maybe they take some profits here. Pulls back nicely. They add here, but they move this stop up. too fast once they add then the stock drops stops them out then goes. That's the double dip. That double dip right there is very common. And after the second one, if you get a double dip that then goes, the move is statistically bigger than if it didn't double dip. So the moves that happen from one dip are nice but the moves that happen from a double dip are bigger on average. You understand? So if you look carefully, this stock double dipped on us, right? So look at it. Drop, run, the second dip, and then the move from the second dip is the big one. Do you guys see that? You see the double dip there? Boom, boom, one, two. This is why I've always taught you when you get this dip, this must go almost all the way to the high again before you have a right to adjust that stop. So your original stop is here. You need this to move up off of the low. Then you can adjust. to stop there because now a break of that low is troublesome but this scenario is not all right this scenario is now the break is troublesome so it's almost like if it's just a little tiny hump it's okay But if it's deep, now if it breaks, that's not okay. But still, this is a tricky one. You know, this bar is very powerful. It's a tricky one. Very tricky open yesterday. Very tricky open yesterday. Yeah, you can actually say that. You can say that it... it dropped it dropped deep enough to go to adjust now here's another thing there's another thing guys there are two things that I encourage that you do to bring clarity back into the trade because sometimes we can start focusing on the bars so intently that we lose sight of the forest. Like we're looking at the individual trees, the individual bars so intensely that we forget that we're we've got to monitor the whole forest. So here let me give an example. One of those ways is to fill your gap in. Alright so when you fill the gap in, whenever you have a gap, when you fill... fill it in and pretend like it didn't gap this adds more clarity to the play for you all right doesn't that look different does it bring something extra to your your thing here so so now you kind of see that this pullback is normal if you connect that right the other thing I teach you to do is to fill in consecutive bars and you can eliminate a single one. See how there's a single interrupt here? We can eliminate that. All right, so when it's a single one, you can remove it. So let's do this. Let's take the whole move down all the way to the low and let's fill that in as if that's one bar. So in reality when I look at this as one fluid move down, I'm still kind of in this gift zone. I don't want to get knocked out of the play anywhere in this zone. This zone is still applying pressure this way. It's well, it should be, I guess I should be doing it downward, right? so it's still applying pressure downward to the right. So it's going to be, it's not going to be easy for this stock to penetrate through everything. So those two things can help bring clarity that is lost sometimes when we're looking at every individual bar. It makes us step back and get the full bigger picture. The bigger picture is this. This is the bigger picture. Top 50%, bottom 50%, declining 20%. There are some people who would actually consider this whale complete. And I'm okay with that because they would say Oliver initial rallied. Drop. Okay. But theoretically, I mean, if we want to be really strict with the definition of pullback, this is not a pullback. This is a pause. What did I always tell you you can do with tails to gain clarity? Can someone help me? What did I always tell you you can do with tails if you want to gain clarity? Erase them. So let's erase the tails. No, that's a pause, right? There's a difference in a pullback and a pause, right? So I'm okay if a trader tells me, Oliver, I got whale complete because it's still a very beautiful game. That's a huge game. So I'm okay with it. But technically speaking, this is one move and your pullback is here. Now, here is the double dip scenario. right there. Now this is the bar that stops you out and you that bar actually winds up being the low bar and you get another one of your events elephant bar. You got to be willing to re-enter this because if not look at what you miss. That's the perfect double-dip scenario. No, Rondo, I don't believe you. I don't believe you, Rondo. Never. Of course you have. Of course you have. So, it doesn't... If you've got a strong re-entry game, it doesn't even matter if you stop out. Some traders are better weak enterers and some people aren't. Some people psychologically have a hang-up. If they get knocked out of a play, they have a hard time going back in because they're haunted by the stop-out. And so the stop-out makes them shy when it comes to going back into it. Some traders... have no issue with that they would rather step out they can step out and get back in 10 times in a row and not even feel it so it does depend on whichever method does depend on what kind of trader you are but you can also use them both meaning that if you can't not take the stop if you can't allow this to drop on you because your risk parameters don't allow it then you gotta get You got to get out, but then you got to regard this as a brand new separate trade with now its own stop. Does this make sense? That reentry is not part of the trade that stopped you out. This is a brand new trade with its own individual parameters. This is the next trade. It is not continuing the old trade. It's the next trade. Jari's asking, is it okay to buy on the second bar? It is okay, but why not this one? I mean because knowing this concept now, you know that this is a potential. Any new event right there now is a buy. You don't need anything extra. You're experiencing the double dip right now. And plus, the entry here is riskier than the entry here because both scenarios have the same stop. So a lot of people think that waiting is safer, but it's not. So you're going to buy there versus there and the stop is the same for both. So which one is safer? Somebody was asking me, what about this buying above the high of the bottom and tail bar? Theoretically, that's okay. But because of the severity of that red, I would like to see what the next bar really can do to weaken that. Alright, now guys, when you miss a main event like this, oh my god, I missed the elephant bar off the 200, then what's your next, what's a way to get on it as a secondary play than the first RBI, right? So if you miss this, do you see your next play? Do you see it? Yeah. the RBI. Boom! That's your next play. Really? And look at the wrist. If you were to be concerned with the pivot to the left, would you ever get a whale, Michael? Would you ever get a whale if you're going to be concerned about that? Would you ever capture one? Tell me, answer me. Would you ever get one if this stops you from, if the former pivot, you wouldn't get one, right? You would never get one. So what's the key? What did I start off this conversation telling you the key is? It's the quality of the first move. What's another key? Does the pullback stay in the upper portion? If it does, if your entry is in the upper portion, you don't have to be worried about this. You understand? So here's an entry, and here's an entry. These entries, and here's an entry. entries are in the top 50 percent. Does this make sense? Olegia is asking, what about 20MA resistance? All right, I'm glad, Olegia, I'm glad you're asking this question. Olegia, where are you from, by the way? I've been waiting here. Okay, cool. All right, no, yeah, 20MA is a band, that's true, but a lot of people, a lot of people mistake this 20MA resistance. When the 20 is rising, is it resistance or support? It's support. When the 20 is declining, which one is it? Right. So what's the 20 doing here? It doesn't have resistance qualities when it's rising. It has resistance qualities when it's declining. declining. So when you dip below the 20, the overhead 20 is not resistance if it's rising. In fact, it's just a rubber band. Boing. Right. OK. All right. So that's a that's a that's I'm very glad you asked that question, Alicia, because that allowed me to clear up a lot. what is likely to be a lot of confusion with that all right so guys some of your best buys are when the stock breaks a rise in 20. i'm going to repeat that some of you should write that down some of your best buys are when the stock breaks a rise in 20. think of a slingshot Think of the slingshot from here guys. Look, look at the slingshot from here. That's a, that's pull the slingshot back and boom. But think about this, pull the slingshot back like here and you're pulling it back more, right?

I'm going to take you right now. I'm going to take you to being right over 80% of the time in the direction. Let me repeat this right now.

What I'm going to cover is going to make you 80% or better winner, which means that out of every 10 trades. you on average get eight of them right. Do you know what you can do with those type of numbers? You can get fabulously wealthy by being right 80% of the time. Some of the best mechanical or algorithmic trading models make millions of dollars and they have a 38% winning ratio.

It's just that when they win, it wins big. 38%. I'm giving you something in this section that's going to give you 80%.

It's going to be very powerful. What separates a master from a novice or from even a regular profitable trader, I'm talking about a masterfully profitable trader, is their directional probability. If you get the direction right, you can kind of mess up other things and still be okay. A bull and bear 180 and what i consider to be a color change which in a sense is a miniature bull and bear 180. so let's quickly cover what a bull 180 is first just to refresh your memory here so here this is this is one of your cards all right it is a fairly solid red bar right that is immediately followed by an even more powerful and solid green bar that supersedes the high of the red bar. So now the key to this event, guys, is that, you know, the key to the event is the amount of green in each bar.

So you can have sort of like wicks on either end, but the vast majority of the bar is body. So the vast majority of the green bar is green, not tails. And the vast majority of the red bar is body or red, the color red and not just wicks or anything like that, right? The other thing about the Bull 180 is that the two bars should be hefty. So we know that the green bar is bigger and taller and heftier, but the red bar is not small.

The red bar is sizable, right? The red bar is formidable. and that's very important to understand now when you so this is by far the most powerful event in your deck of cards you will never find something more powerful than the bull 180 okay so out of all your actionable events this ranks at the top for the most power so we have a much smaller red bar it's for its size it's hefty too it's just smaller and then you have a smaller green bar but it too is hefty what do i mean by hefty meaning that the vast majority of the bar is still body this is what i call a color change which is which has significance but this is a monster color change.

That's the Bold 180. One is more regular and one is more hefty. The quality of either of these is really determined by the red bar, not really the green bar. That's an interesting thing to note.

It's the quality of the red before the green. So as an example, Take a look at this, okay? This could be considered this kind of bar, but it doesn't matter.

It's the red bar that really determines which one of these it is. And because the red is not hefty, then it must be the color change. Does that make sense, guys? If the red is small, If the body is rather small, then it's, even if the green is tall, it's still considered a color change. It's not a Bull 180. What makes a bull or bear 180 is the first bar.

So if we take all of this in reverse, right, and we do something like this, right? So we do green bar first, red bar second, boom, there is your bear 180. And then we do this, green bar. And boom, red bar. That's a color change even though the red bar is hefty, really big and hefty, right? Because the bar, the first bar determines which one it is.

Bear 180 is here. Color change is here. Make sense, guys? Make sense? You got it?

Okay, good. Now, which one is this? One or two? That's right, it's one, because the green is tall and hefty, not small.

Okay, from your bull 180, which one is this? One or two? One being bold, 182 being color change, right.

Good. Beautiful. And this as well.

This as well. All of these are color changes. Some people have confusion with the wicks, all right.

So if a body like this, right, if it has a wick. that's too tall what does that become guys what is that called is this a topping tail bar is that one a topping table no that's just a little wick so there should be no confusion regarding tails guys if the tail gets long enough it becomes something else right yes you got that if your tail be is big enough it becomes something else so a 12 year old would say that's a big tail and that's a little tail and adults will say but how what percentage of a little tail versus the big tail makes it a little tail is it 10 you know that that's more of the adult mindset coming in so you can see it in jerry's question and not to tease you jerry it's just i do want everyone i want to catch everyone doing this right How strong is a color change compared to a Bull 180? Is it 80%, 70%, 50%? Guys, color changes are significant.

They are buyable and sellable events. Bull 180s and Bear 180s are buy and sell events, but they are your most powerful buy and sell events. Let's say, for instance, you have... a rising 20 period moving average.

Now the 20 period moving average is a location item. All right. The 20 MA is a location item. The 200 period moving average is a location item. Always remember this.

These are location items. the reason why you need to to to understand this is because many people confuse these as an event item it is not these are not a events they are not event items they are location items let me give you an example so the trader would do this the trader is buying a falling knife right there there's This is not an event, but the trader blindly buys there, confusing the 20 period moving average as the event itself versus the location at which you need to see an event. Do you guys follow the difference between location and event? Got it?

If you do, let me know. All right. You just don't.

buy something because it's near the 20. You need an event at or near the 20, okay? but this can just keep searing through okay all right so that's the difference between a location item and an event item okay now the 200 halt you're under the 200 boom you get above the 200 there's some height we pull back Boom! An event happens right there.

That's the 200 MA halt. So what I'm teaching you is kind of an event location concept, where if you combine one of your events with this starting from below to now above and halt, Wow! Take a look at this guys.

We get above the 200, we get some height, we pull back, and we get, boom, the color change. Now what makes this one so special? This is extra special, but why? It's a 200 MA halt, but it's also the 20 period moving average retest at the same time, in the same location.

Wow! So guys, you see how you can start stacking odds in your favor by how much lines up at the same point, right? Without the 20 being there, that's awesome.

With the 20 there, it's more awesome. This is also what some of you are referring to here. This is also the situation where your stock is trapped between an overhead.

flat 200 and a rising 20 and i've taught you in the past that usually in that scenario it's the rising moving average that wins so the 20 often wins by pushing it above if you get that successful retest plus an event boom now remember don't be like the traders that just buy you falling knives into these this one worked but you need an event you need a color change you need a bottoming tail bar you need a bow 180 you need a red bar takeout this is a red bar takeout by the way this event here is a red bar takeout it's just a delayed color change right that's all a red bar takeout is it's just delayed it didn't happen this bar it happened some subsequent bar later you So here you are below, you get above, you gain some distance, you gain some height, you pull back, and boom, a bottoming tailbar forms. Boom, a bottoming tailbar forms. So there's your halt, and you kind of have it here. You're under, you get above, you pull back, and you're bottoming tailbar.

Now, this is an interesting one because this brings out a nuance that I'm very glad it's bringing out. Remember that the moving averages are more like zones or fences that you can lean on. They're not really skinny lines.

So this is sort of pressing up against the fence, right, but not necessarily breaking. So here's how you judge whether or not it's bending or breaking. This is bending but not breaking.

Let me tell you how. It's simple. If your trigger entry point is above the item, it's bending it. So where do you buy above this tail bar right there? If your entry is above the item, it's bending the item.

Like boxing ropes, a boxer can bend the ropes without breaking the ropes. Does that make sense? If your entry is under the 20, it broke it.

If it's above above the 20 it didn't break it all right and so that's how you judge that so you see some people say but oliver this broke the 20 no it didn't break the 20 that's just bending the 20 your entry above this tail is there your entry above that tail is there boom guys this is this is very very powerful because this will give you right this concept will give you you The ability to capture trend changes like a professional. so oftentimes your stock is doing this right and your 20 is doing this and then you know you're you're you'll you'll get something like this and you're boom now some people buy that first one mistake you see that that first one is a mistake it's rarely the first break you understand you have to see you have to see well is the next pullback successful uh oh let's see boom right there now that event happens a color change or something and now right there you have caught the potential trend change you've caught the beginning of something that could be in enduring that could be monstrous. Gardner says I was making this mistake earlier in the week. Yes, the first one is rarely the one, guys, but the successful pullback after the first one. Let's do the reverse of this.

Let's do the reverse of this. Boom. A lot of people will try to short back.

Wrong. It's rarely the first crack. Do you understand? It's the retest. Wait a minute.

Let's see. Uh-oh. Here's the 20MA halt on the reverse side.

Boom! Event right there. Now that's your potential short. what okay what event is this guys color change or bear 180 you see how simple that was what's this only works in the past bear 180 color change i don't really even care what you call it guys because they're both events they're both you have to dive into both right is the location good yeah costa yes beautiful what is this What is that bar called?

Elephant bar. Okay. This is the full market cycle, right? So look at your full cycles, right? That's one.

Here's another. But sometimes they're wider, right? The cycles can be shorter, wider. It depends. So when you're dealing with this, like look at where your cycle change is happening, your trend change.

is happening so you drop and the 20 starts halting right to the other side which means that you have started this side of the cycle yes and now we're what part of the cycle are you when you see you see sometimes the bottom of the cycle and the top are sharp so you get this Sometimes they're flat like that. Sometimes they're sharp. This one's flat.

This one's sharp. This is the up cycle. This is the down.

This is the up. Sharp. This is the down. Sharp.

This is the up. Sharp. This is the down.

Flat. There's only one cycle. I've taught you that over and over again.

You can't trade. someone else's experience. I give you my experience, but you can't trade my experience.

So then what do you do with it? You have to make that experience your experience. It has to stop being my experience.

You see, in my experience, when you get a solid red bar takeout, near the 200, it's a buy. Look at this. Red bar, takeout, near the 20. That's my experience.

I have given you that. It is my experience that when a bottoming tail bar gets taken out near the 200, it is a buy. That is my experience.

It is my experience that a color change near a 200 is a buy. That is my experience. But you can't trade my experience.

You can only understand my experience. So my experience becomes knowledge for you. But knowledge is not enough. I'm going to repeat that.

My experience shared with you becomes knowledge. It does not become experience for you. It becomes knowledge for you.

This is a very powerful concept, guys. But it is the same concept as what I explained to you when we started the session. Remember I told you that fat green bars shoot their power to the right and serve.

This area serves as support. So when... if you were to drop into this area, there is likely a bounce out of that area, right?

So we discussed that, and Exxon is still going, okay? This concept, this is the micro version of that concept, but this is... the macro version of it. Let's put make this one move to the upside. It's on a slant a little bit.

This is one powerful move. This is the macro version of what I just drew for you. This is the macro version of what I just drew for you. Now this whole move shoots its power to the right meaning that any pullback into it will ultimately in most cases be caught checked subdued and a new move to new high is very likely This is the single bar version of that concept.

And this is the macro move version of the same concept. Put the high of something negative to shame. That's the key. Does your move put the high of something negative?

to shame the pullback is viable that's what i want you to know and that can be even in a bear market because this move cracks the back of the bear all right now take a look at this green bar here That green bar is shooting its power to the right, creating a force field. And look, you bounce out of there. Now, take a look at this green bar, which shoots its power to the right.

And look, you... Bounce out of there. You bounce out of there.

You see? And that's the micro versions. And the macro version.

If, remember the three moving averages. 8, 13, 20. If your pullback breaks all three, there is not going to be a whale. Now, I can't say that 100% of the time, but it's best to assume 100% of the time there is no whale.

Some of you understand that. If, I'm going to repeat it again. If your pullback breaks all three, The next pullback will be shallow most of the time and do something like that.

There will be no whale. Guys, the value of this is priceless. You can't put a number on stuff like this because 99.9% of the people out there have no way of judging and knowing these little nuanced but very powerful things.

No one has. the ability to read the future. Providence, in all of his wisdom, has not given us the ability to read so very far in front of our nose.

This is something very important to understand, right? And so, guys, while no one really has the ability to read the future, not even me, of course, what we can do is come up with things that potentially can happen and prepare for those things. What we can do is assess the probability of something happening. All right. And prepare for that.

But we can't actually ever know. So the way you deal with the future is to deal with it through probabilities and to have a variety of scenarios, highly probable scenarios mapped out for what might happen. And then have specific strategies to take advantage for each one of those scenarios that you've mapped out.

What's the best way to get a mature whale? it is using a moving average and a the big bar concept so there's a combination called m a moving average big bar combo all right moving average big bar combo so what you do is once you get the whale you have the whale here Now, you're going to, maybe you take some off. You had two.

This goes to one. You're going to leave one in for the possibility of a mature whale. You're now going to use moving average. Let's say the 20 in this case.

Okay. And the big bar concept. So from this point on. right here do this here like this you're going to do moving average and you're going to ignore what the what the stock is doing until there's a sizable bar boom now you drop it to the sizable bar When the moving average passes or improves on your stop of the big bar right there, now the moving average stop is tighter than your big bar stop. You convert to the moving average until the next big bar happens.

Boom. And the big bar will happen before your moving average is present. Moving averages are delayed items. Do you understand?

So the big bar happens beef when the moving average is here So now your stop shouldn't be here your stop should drop to here until that moving average catches up and improves on the stop and And the next time you adjust is when you get a big bar. There is no big bar, no big bar, no big bar. Stay with the 20, no big bar, no big bar, no big bar.

And you're riding this out. So take a look at if we were to do this the whole way, all right? So if we were to do this the whole way, you're moving average, big bar. then right there no you're no you're actually big bar and then look big bar and then big bar and then moving average so your big bars happen before the moving average can improve on the big bars You guys got that?

So you can see it, big bar moving average is here. So which one is a better stop? The big bar. Then the next big bar happens and my moving average is there.

Which is the better stop? The big bar. Then the next moving big bar happens here and my moving average is there. What's the best stop? Big bar.

Then the moving average crosses the big bar stop. Now you've converted or flipped to the moving average, moving average, waiting for the next big bar, but staying with the moving average and there's no big bar. So you stay with the moving average.

That's beautiful. And that combo gets you all the way, I would say to here. Wow.

You got that? The moving average big bar concept. The moving average big bar combo is how you ride out your mature whales. Do you have that? Do you understand that?

Do you get that combo? Big bar moving average. Big bar moving average. Big bar moving average. Few of you let me know.

Let me know. You got it? All right, good. Now, it is important.

Two bar stop, it's your choice. One bar stop, two bar stop, it's your choice. That is your choice. I always tell you that when you are rich, rich people in this world have choices. They have more choices than poor people.

When you are in leg two of a whale, you are rich. Which means that you have choices. You want to do a two bar stop?

Fine. You want to do a one bar stop? Fine.

You want to do a backflip? Fine. You want to do a cartwheel? Fine. You want to break out in song?

Fine. You're rich. It's the way it is.

I don't make the rules. Just the way it is. All right. Um, so now that we know how to... maximize a mature whale right there are a couple other things i want to point out you don't do this combo on leg one i'm going to repeat that you do not do a trailing stop combo on leg one this only is in whale you complete territory this is whale complete territory right there now you bring the combo in you do not do a trailing stop on leg one a trail why because the the pullback is going to take you out of the trade if you were doing a if you were doing a big bar combo here like okay moving so i enter here all right now my stop is here now my my next stop is a big bar look at how you get taken out of the trade leg one is not for trailing your stop only leg two is for the combo all right please remember that leg two this is leg one interrupted by the pullback very important okay it's only for maximizing the whale complete zone okay There is one other thing I want to point out and then we're done.

Okay. The other thing I want to point out is which moving average do you use? Because it's not always the 20 period moving average. So there are three possible moving averages you're going to use. This, you should take notes on this.

If you are not familiar with this, you should take notes on this. There's the eight. the 13 and the 20. All right. These are your three trailing moving averages. We have as a default, the 20 period moving average right there, but that is sometimes not the appropriate moving average to do your trail with.

So which one do we choose? I'll explain. Your pullback reveals which one you choose. So let's put all three moving averages on the chart. And whichever one the pullback does not break is your moving average.

Okay? So if we put the 8, if we put the 8-period moving average on the chart, alright? i'm going to put this here remember it's the 8 the 13 or the 20. if we put the 8 on it when doing this here we put the 8 on it i'm going to change that to the 8 we can clearly see do that with a different color that the pullback breaks the 8. So it's not the 8. So boom.

If we put the 13 on it, that breaks it too. So which moving average does it not break? It's the 20. You got it? It's the only one of the three that it didn't break. Tell me you understand this.

That's how you find out what moving average do I use for the big bar moving average combo. First thing, right, that's a nothing bar, right? But the second bar is interesting in that you have almost two perfect red bars.

Now you guys should already know what can you do with these when they're back to back like that. You can combine them. Back to back near perfect bars can be combined, right?

Back to back near perfect bars can be combined. I see something really nice there. So yeah, you got in on the second bar, which is cool. Take this second. The first color change, if you like here.

Prophet. Prophet. Walk down.

Where would the stop be? I would do max. I wouldn't be doing the bars.

I told you that the the the the FAT4 is your help so try to get above that. So yeah the second bar would be okay or max would be okay. Um the walk down is pretty simple. Break even.

All right. I'm okay moving to that pivot there. From here onward, from here onward, what's your best option for walking this down?

You tell me. Not just moving average. Right, the combo, right? The moving average big bar combo.

Right? So you do this. Now I would say that 13 can be used here.

So now you're moving averaging, okay big bar, and then the moving average crosses. You're back to moving average and then big bar. Moving average crosses, but here you see how this accelerates away?

That's when I get out. Does that make sense? Accelerate away from that moving average. Gotta take profits on that.

Right? Or as we start accelerating away, you can just start bar by barring out. Or here you start, oh whoa, I'm accelerating bar by bar out. Yep, sometimes you get scared of it snapping back on you.

Yeah, but that's what the big bar stop is going to prevent from happening. You see, as long as a stock can't take out its big bars, it ain't snapping back. You understand?

So this is the greatest sign that your trend is healthy. Big bars are not even flirted with. There's not even a flirting of a big bar.

there's no move back up into the bar's range there's no stalling it is red bar and follow through for the most part um and the other thing is when your railroad tracks break so if you look at your 13 and you look at your stop here it's almost like this parallel like until here where it breaks sharply. That breaking sharply, now you can really snap back. If anything I teach you to do on the 2 is applicable on the 5 as well, yeah, you can do it on the 5. Very slow motion trade, but yeah, that moving average would have to be tighter on the 5 though. So you'd go to the 8. But same thing. here uh when you use 13 versus 8 based on the pivot right so i'll show you so if we take the if we take this away is your 20 relevant no how do we know if a moving average is relevant that the pauses and pullbacks come near it doesn't have to touch but whatever one it's coming near to is the relevant one.

So you've got three choices 20, 13, 8. Nothing is coming near to your 20. So it must be the next one down. I can tell you right now the 8 is crossing it. That seems very clear to me that it's not the 8. So Boom! Now we're coming near and it doesn't have to touch.

It just can't be too much space between. I know I'm looking at a five, but I want to show you using the five, this concept. You see how in the latter part of yesterday, XOM is rising.

Do you understand? This means that this gap is breaking this, which gives it higher odds of running, continuing. This is an igniting gap.

All right. That's an igniting gap. Igniting gaps can run as opposed to an exhaustion gap.

An exhaustion gap would be. Late day Exxon drops, closes near the low, and then gaps here. So it's almost like it's one last fell swoop to continue what was going on.

This is an exhaustion gap. It's oversold in most cases. This... is an igniting gap which means that it's just starting a brand new direction. So you should be aware of which gap, if your stocks are gapping, what gaps are they?

Are they continuing what the latter part of the day was doing? Or is the gap changing something? Does this make sense? So yeah, these things can give you a decent little edge with your gap scenarios. Now, think of it in terms of people, right?

Think of it in terms of people, guys. Like, if my stock has been running into the close, traders who hold overnight, there's millions of them, guys. Traders that hold overnight, they're in profit.

from at least the latter part of the day. Then the next morning they don't even have to suffer through the stock moving up there over time. They get the extra gain without any effort instantly. Think of what this does to their profitability from the first second of the day. This is what creates the traders who may have gotten in here.

It creates an instant profit-taking opportunity. That's why it's an exhaustion gap, which a lot of times reverses itself. Here, the traders... are hoping that the market's closed now the traders are hoping that it opens here but instead it opens there now look at the gain that was lost that they had understand and this can follow through as they don't want to lose this part. So they start selling.

Does that make sense? See the gain and see the loss. Now they start selling not to lose the rest. You know, after the first minute, yeah, you can get in that's early.

There's a lot of minutes in the day. If you're getting in after the first minute, that's still super early. It's not necessary to improve on simple moving averages.

It's not necessary to tweak them. It's not necessary to gain an additional edge. None of that's necessary, mainly because moving averages are an area.

And that's the first thing I want to talk to you about today. These are basic, but very powerful things. I need you to revisit and get yourself reacquainted to.

Moving averages are areas. That's the first thing I want you to understand. Let's say I have a 20 period moving average here. All right. That's a 20 period moving average.

Now, that's not that moving average in reality is not a skinny line. That moving average is a zone. So it has a little zone above it.

and it has a little zone beneath it so in a in a way the moving average serves as the vertebrae that runs through the 20 period moving average zone it's sort of like the spine of the 20 period moving average the chart only shows you the spine it doesn't show you that the body that the spine supports the chart when you put the 20 on there is only showing you the spine. It's not showing you the body. The body of the 20 period moving average is more like represented by the yellow that I've drawn here.

So there's a difference between bending a moving average like the 20. This would be like bending the moving average, bending, but not breaking. The other concept regarding moving averages is that they lead. the way most of the time, not 100% of the time, but a vast majority of the percentage of the time. So let's say 85% of the time, let's use that number.

I don't know exactly what it is, but it's more or less 85 percent 85 percent of the time you sh the 20 period moving average in particular leads the way which means that you should be trading in the direction of the 20 period moving average so if your 20 print moving average is pointing or trending upward your play should be upward not downward i would say that the vast majority of traders losses are due to breaking this rule not that there are exceptions but when you make it a practice of trading against the 20 period moving average you're already swimming upstream you've already got gravity and nature and nature's laws working against you all right When you try to find a buy in Roku here just because there's green, when you try to find a buy here, you are fighting nature. You're fighting all the laws of the universe. That's concept one.

Concept two, we should be trading in the direction of the 20-per-moving average the vast majority of the time. So when you're betting down. The color game is simply when does red eliminate green? Boom, right there.

This green is eliminated right at that point. Boom, okay? When does this green cluster? Here's a green, here's a green. I'm sorry, here's a green.

When does green get eliminated by red? Right there. Boom! Wait a minute. Here's green.

When does this green get eliminated by red? Right there. So let's find all the points. Here, here, here.

Do you see the color game? Red takes out green. Red takes out green. Red takes out green. Do you see that?

So we've got three concepts here, right? We've got, let's write them down. We've got moving averages are zones. They're not skinny lines to trade with.

to 20 ma at least 85 of the time boom here we go again and three color game with 20 ma is your key to consistent profitability. The very best location to play the color game is at or near the 20 period moving average. It's not the only location.

I am just saying it is the best location. So concept four. at or near the 20 ma as an example is best it's not the only it's best now as you can see roku here these entries are not near the 20 but that is because it's power trending and when it's when when it's power trending, you must go to another moving average.

And so your 20 gets replaced by something like the 8. So now your 20 has been substituted by a power trend moving average. And so now It's still at or near, but instead of the 20, it's the 8, which can serve as a replacement for the 20 during power trends. Do you understand this? Do you see a rising 20 color game play? Do you see it?

Yeah, you see it? Boom. Red gets taken out there.

This is the bar that did it. That's your stop. This is your risk unit. And the rest is history.

Rising 20. Here is green taking out red. Here is green taking out red. Do these qualify as being at or near a rising 20 period moving average playing the color game at or near a rising 20 MA? Yes, it does.

Always look at your risk unit. Hany is saying that he has experienced that when he places the stop under the bar that is eliminating red, that he gets stopped out all the time. Well, has any of these symbols been stopped out?

Let's take a look again. Here's the bar that eliminates. Here's your stop.

Nope, not there. Here's the stop. Eliminate it. Nope, okay. But eliminate it here.

If you do a one bar stop. So we got one. Okay.

Two for one. HD. Let's track this.

Boom. Here's your stop. Nope.

Here's your stop. Nope. Here's your stop. No.

Violation stop. Nope. What about here, though?

No. What about here? Remember I told you that the 20 print moving average is a zone. You see that?

Don't interpret that as a break. Remember that's concept number one. You're dealing with a zone, not a skinny line.

Is this near the 20? Yes, because it's near the zone, not the skinny line. You see? that's concept number one don't forget the concepts don't forget the concepts it's a fence it's boxing ropes it's a trampoline it's a mattress it's not a skinny line that's concept one now when it comes to the low of the bar i you i would perf for you revert to the wider stop of the pivot if you have one so do you see how here is your bar that you're buying but you you can do the low here that's not wrong but if you you'll give it a little bit more room below the pivot better You see, if you come in here, you can go here.

It's not technically wrong, but a little bit extra under the pivot is better. If you go in below this green here, you can use this bar, but giving it a little bit more above the pivot is better. In this case, right, the bar is the top of the pivot.

Is this the color game? Yes. Remember, it's a zone. It's not a skinny line.

What about this? Is that the color game with your stop there? Yes.

Okay. You get it. In your narrow state, if you get an elephant or a tail bar. that forms anywhere above the narrow state.

Now, these can be touching a little bit. It doesn't matter. But as long as they're above the narrow state, above the items, above the 20, above the 200, if you get that any of these two bars form there, your direction is...

Very high probability up, up from here, up from there, up from there. All you have to do is wait for one of your two bars to form in the right location. And there's only, on the buy side, there's only three locations. Well, there's only really two locations because this is the same as this.

So we can take this one away. There's only two locations. where buying is appropriate, right above a narrow state and below a wide state. Now, remember, here we're playing the color game off the 20, a color game off the 20. That's different.

But we're talking about the best locations to start your trades from. There's really only two, one, two. Okay, now the best. trick the best location to short or play down is narrow state under or wide state all right so there's only two best locations to short from and there's only two best locations to go long from color game in between but again today i wanted to focus on the most powerful locations okay this is getting your directional trading right now guys take your cell phone out take a freaking snapshot of this take your whatever image capture screen capture do something Hold this out, stick it on your freaking computer, stick it on your freaking refrigerator, stick it on your bathroom mirror, stick it on the headboard of your bed, stick it on your freaking keyboard, stick it on your desk, make freaking wallpaper.

Do what you gotta do to sear this into your mind. Because this can serve as the check. When you're ready to do something, you better make sure you're ready to buy.

Is it in one of these green spots? You're ready to short? Wait a minute. Let me check.

Is it in one of these red spots? No, I'm not doing that. Let this be your guide. Do you understand?

Keep a cut. Make it your screensaver in your phone. I don't. freaking tattoo tattoo your wife's forehead or your husband's forehead just so that it's a constant freaking reminder of where the best trades occur from should i say what i'm saying there's something else i want to point out here um i'm constantly reminding my mentorship traders that there's a tendency for stocks to do what I call is a double dip and you've got to be prepared for that.

The double dip is a trap that gets a lot of traders. All right, it's this. A stop moves up, it pulls back very nicely.

All right, so trader buys here. Boom, stop there. Moves up nicely.

Maybe they take some profits here. Pulls back nicely. They add here, but they move this stop up.

too fast once they add then the stock drops stops them out then goes. That's the double dip. That double dip right there is very common.

And after the second one, if you get a double dip that then goes, the move is statistically bigger than if it didn't double dip. So the moves that happen from one dip are nice but the moves that happen from a double dip are bigger on average. You understand?

So if you look carefully, this stock double dipped on us, right? So look at it. Drop, run, the second dip, and then the move from the second dip is the big one. Do you guys see that? You see the double dip there?

Boom, boom, one, two. This is why I've always taught you when you get this dip, this must go almost all the way to the high again before you have a right to adjust that stop. So your original stop is here.

You need this to move up off of the low. Then you can adjust. to stop there because now a break of that low is troublesome but this scenario is not all right this scenario is now the break is troublesome so it's almost like if it's just a little tiny hump it's okay But if it's deep, now if it breaks, that's not okay. But still, this is a tricky one.

You know, this bar is very powerful. It's a tricky one. Very tricky open yesterday. Very tricky open yesterday.

Yeah, you can actually say that. You can say that it... it dropped it dropped deep enough to go to adjust now here's another thing there's another thing guys there are two things that I encourage that you do to bring clarity back into the trade because sometimes we can start focusing on the bars so intently that we lose sight of the forest.

Like we're looking at the individual trees, the individual bars so intensely that we forget that we're we've got to monitor the whole forest. So here let me give an example. One of those ways is to fill your gap in. Alright so when you fill the gap in, whenever you have a gap, when you fill...

fill it in and pretend like it didn't gap this adds more clarity to the play for you all right doesn't that look different does it bring something extra to your your thing here so so now you kind of see that this pullback is normal if you connect that right the other thing I teach you to do is to fill in consecutive bars and you can eliminate a single one. See how there's a single interrupt here? We can eliminate that. All right, so when it's a single one, you can remove it. So let's do this.

Let's take the whole move down all the way to the low and let's fill that in as if that's one bar. So in reality when I look at this as one fluid move down, I'm still kind of in this gift zone. I don't want to get knocked out of the play anywhere in this zone. This zone is still applying pressure this way. It's well, it should be, I guess I should be doing it downward, right?

so it's still applying pressure downward to the right. So it's going to be, it's not going to be easy for this stock to penetrate through everything. So those two things can help bring clarity that is lost sometimes when we're looking at every individual bar.

It makes us step back and get the full bigger picture. The bigger picture is this. This is the bigger picture.

Top 50%, bottom 50%, declining 20%. There are some people who would actually consider this whale complete. And I'm okay with that because they would say Oliver initial rallied. Drop. Okay.

But theoretically, I mean, if we want to be really strict with the definition of pullback, this is not a pullback. This is a pause. What did I always tell you you can do with tails to gain clarity? Can someone help me?

What did I always tell you you can do with tails if you want to gain clarity? Erase them. So let's erase the tails. No, that's a pause, right? There's a difference in a pullback and a pause, right?

So I'm okay if a trader tells me, Oliver, I got whale complete because it's still a very beautiful game. That's a huge game. So I'm okay with it. But technically speaking, this is one move and your pullback is here. Now, here is the double dip scenario.

right there. Now this is the bar that stops you out and you that bar actually winds up being the low bar and you get another one of your events elephant bar. You got to be willing to re-enter this because if not look at what you miss. That's the perfect double-dip scenario. No, Rondo, I don't believe you.

I don't believe you, Rondo. Never. Of course you have. Of course you have. So, it doesn't...

If you've got a strong re-entry game, it doesn't even matter if you stop out. Some traders are better weak enterers and some people aren't. Some people psychologically have a hang-up.

If they get knocked out of a play, they have a hard time going back in because they're haunted by the stop-out. And so the stop-out makes them shy when it comes to going back into it. Some traders... have no issue with that they would rather step out they can step out and get back in 10 times in a row and not even feel it so it does depend on whichever method does depend on what kind of trader you are but you can also use them both meaning that if you can't not take the stop if you can't allow this to drop on you because your risk parameters don't allow it then you gotta get You got to get out, but then you got to regard this as a brand new separate trade with now its own stop.

Does this make sense? That reentry is not part of the trade that stopped you out. This is a brand new trade with its own individual parameters.

This is the next trade. It is not continuing the old trade. It's the next trade.

Jari's asking, is it okay to buy on the second bar? It is okay, but why not this one? I mean because knowing this concept now, you know that this is a potential.

Any new event right there now is a buy. You don't need anything extra. You're experiencing the double dip right now.

And plus, the entry here is riskier than the entry here because both scenarios have the same stop. So a lot of people think that waiting is safer, but it's not. So you're going to buy there versus there and the stop is the same for both.

So which one is safer? Somebody was asking me, what about this buying above the high of the bottom and tail bar? Theoretically, that's okay.

But because of the severity of that red, I would like to see what the next bar really can do to weaken that. Alright, now guys, when you miss a main event like this, oh my god, I missed the elephant bar off the 200, then what's your next, what's a way to get on it as a secondary play than the first RBI, right? So if you miss this, do you see your next play? Do you see it? Yeah.

the RBI. Boom! That's your next play.

Really? And look at the wrist. If you were to be concerned with the pivot to the left, would you ever get a whale, Michael? Would you ever get a whale if you're going to be concerned about that? Would you ever capture one?

Tell me, answer me. Would you ever get one if this stops you from, if the former pivot, you wouldn't get one, right? You would never get one.

So what's the key? What did I start off this conversation telling you the key is? It's the quality of the first move.

What's another key? Does the pullback stay in the upper portion? If it does, if your entry is in the upper portion, you don't have to be worried about this.

You understand? So here's an entry, and here's an entry. These entries, and here's an entry.

entries are in the top 50 percent. Does this make sense? Olegia is asking, what about 20MA resistance? All right, I'm glad, Olegia, I'm glad you're asking this question.

Olegia, where are you from, by the way? I've been waiting here. Okay, cool. All right, no, yeah, 20MA is a band, that's true, but a lot of people, a lot of people mistake this 20MA resistance.

When the 20 is rising, is it resistance or support? It's support. When the 20 is declining, which one is it? Right.

So what's the 20 doing here? It doesn't have resistance qualities when it's rising. It has resistance qualities when it's declining. declining.

So when you dip below the 20, the overhead 20 is not resistance if it's rising. In fact, it's just a rubber band. Boing.

Right. OK. All right. So that's a that's a that's I'm very glad you asked that question, Alicia, because that allowed me to clear up a lot. what is likely to be a lot of confusion with that all right so guys some of your best buys are when the stock breaks a rise in 20. i'm going to repeat that some of you should write that down some of your best buys are when the stock breaks a rise in 20. think of a slingshot Think of the slingshot from here guys.

Look, look at the slingshot from here. That's a, that's pull the slingshot back and boom. But think about this, pull the slingshot back like here and you're pulling it back more, right?

Transcript for:Effective Trading Strategies and Patterns

Transcript for:
Effective Trading Strategies and Patterns