Introduction to The Strat

Overview

• The Strat is a trading strategy formulated by Rob Smith.
• Covers three scenarios and three truths.
• Not an in-depth class, but fundamentals will be covered.
• Recommended to watch a detailed class by Tensho for more information.

Key Concepts

• Broadening Formations: Understanding what they are and how to draw them.
• Time Frame Continuity: Importance of aligning different time frame signals.
• Actionable Signals: Recognizing signals to take action in trades.

Scenarios in The Strat

1. Scenario 1 (Inside Bar)

   • Inside Bar: Candle does not break the range (high or low) of the previous candle.
   • Signifies consolidation (neither bulls nor bears have control).
   • Entry strategy: Wait for the break of the high or low of the inside bar.

2. Scenario 2 (Directional Bar)

   • Breaks the high or low of the previous candle.
   • Two Down: Breaks the low of the previous candle.
   • Two Up: Breaks the high of the previous candle.
   • Color of the candle is irrelevant, only direction matters.

3. Scenario 3 (Outside Bar)

   • Breaks both the high and low of the previous candle.
   • Signifies aggressive buying or selling.
   • Used to anticipate the future trend direction based on the aggressive move.
   • Recognized as a broadening formation on smaller time frames.

Trading Strategy

• Use a combination of the three scenarios to build trading strategies.
• Common combinations include 2-2 reversals, 3-2-2 reversals, and continuations.
• Inside bars are good for playing both directions, depending on breakout.
• Price targets and entries should be marked based on the previous candle's range.

Advanced Concepts

• Hammers and Shooters:

  • Hammers: Actionable signal for reversal to the upside.
  • Shooters: Actionable signal for reversal to the downside.

• Trend Analysis:

  • Understanding uptrend (higher highs, higher lows) and downtrend (lower highs, lower lows).
  • Importance of drawing trend lines to identify continuation or reversal points.

Broadening Formations

• Used to identify support and resistance levels in a non-linear manner.
• Expansion pattern, looks like a megaphone.
• Draw from a high to a lower high (top) or a low to a higher low (bottom).

Time Frame Continuity

• Aligns the 60-minute, daily, weekly, and monthly signals to determine participant control.
• Full time frame continuity indicates a stronger trend.

Practical Application

• Recommended to practice identifying inside bars and drawing broadening formations.
• Assignments to chart specific stocks and identify potential trades based on The Strat.

Tools and Resources

• Indicator: Strat Teach V2 for marking scenario types on charts.
• Located in the education tab for further learning.

Homework and Practice

• Chart Verizon and Disney using Strat concepts.
• Use broadening formations and identify inside bars.
• Post findings and progress in the group discussion.

Final Notes

• Trading is personal, and the application of The Strat can be customized.
• Continuous learning and practice are essential for mastering The Strat.