Day Trading Advanced Lesson 3: How to Trade ABCD Pattern (Opening Range Breakouts, ABCD Pattern)
Summary
TLDRThis advanced trading lesson focuses on identifying and trading the ABCD pattern with AMD stock. It emphasizes the importance of volume, higher highs and lows, and pullbacks for opening range breakouts. The video demonstrates how to enter trades during consolidation periods and take profits at resistance levels. It also highlights the use of 1-minute and 5-minute charts to spot bullish signals and warns of potential trend changes, such as losing the 20 EMA, indicating a shift from pullback to a new direction.
Takeaways
- 📈 Look for strong bullish patterns with higher highs and higher lows as potential long entry signals.
- 🔍 Use the opening range break as a strategy to identify potential entry points for trades.
- ⏱ Wait for a pullback on the 1-minute chart to confirm the uptrend before going long on an opening range break.
- 🛑 Set a stop loss at or slightly below the entry point to manage risk effectively.
- 📊 Observe consolidation periods on the 1-minute chart for breakout opportunities on new 15-minute candles.
- 📉 Be alert for signs of trend reversal, such as a price action breaking the moving average (MA) and forming an engulfing pattern on the 5-minute chart.
- 📈 Recognize ABCD patterns as a bullish signal, especially when the price is quickly bought back up after a sell-off.
- 📊 Check moving averages for their slope to confirm the direction of the trend; an upward sloping MA indicates a bullish trend.
- 📍 Use the hammer candle on the 1-minute chart as a bullish signal for potential entry points.
- 📈 Take partial profits at the next resistance level to secure gains while the trade is in a green position.
- 🚨 If the price action indicates a trend change, such as losing the 20 EMA, protect profits by closing the position.
Q & A
What is the initial condition described for AMD's stock at the opening?
-AMD's stock opened up with volume right from the start, indicating a strong start to the trading session.
What trading pattern is mentioned as being created by the price action?
-The price action is creating a strong bullish pattern characterized by higher highs and higher lows.
What is an opening range breakout and why is it significant?
-An opening range breakout refers to a situation where the price moves outside the range it opened within, often signaling a strong directional move and a potential entry point for a trade.
What is the recommended action when observing a pullback on the 1-minute chart?
-The recommended action is to wait and see if the uptrend is going to hold or sell off before deciding to go long for an opening range breakout.
What does the term 'consolidation period' mean in the context of the 1-minute chart?
-A consolidation period refers to a phase in the market where the price is moving within a narrow range, indicating indecision among traders before a potential breakout or breakdown.
What is the significance of a new high of the day on the 15-minute chart?
-A new high of the day on the 15-minute chart indicates a strong upward momentum and could be a precursor to further price increases.
What is the strategy for trading a 15-minute opening range breakout as described in the script?
-The strategy involves looking for a pullback to enter a breakout trade after the pullback, setting the stop loss at a specific level, in this case, at 'V web'.
What does the script suggest about the presence of an ABCD pattern on the charts?
-The script suggests that the presence of an ABCD pattern, especially when accompanied by increasing volume, is a positive signal that buyers are in control and it could be a good entry point for a long trade.
What is the importance of the moving averages in the context of the provided script?
-The moving averages are important as they indicate the trend direction. In the script, the moving averages are still sloping up, confirming the uptrend and providing a bullish signal.
What does the script imply about the 'hammer candle' on the 1-minute chart?
-The 'hammer candle' on the 1-minute chart is described as a very bullish sign, indicating potential strength in the uptrend and a good signal for an entry.
What is the suggested action when the price breaks the 20 EMA in the script?
-When the price breaks the 20 EMA, it is suggested that it is no longer a pullback and sellers are taking control. The trader should protect their profit and exit their position.
How did Andrew trade the ABCD pattern as described in the script?
-Andrew traded the ABCD pattern by going long at 2790 after observing the price quickly bought back up, which was the entry signal for him. He then took profits at the next resistance level at 28.44.
Outlines
📈 Advanced Trading Strategy with AMD Stock Analysis
This paragraph discusses an advanced trading lesson focusing on the AMD stock. It begins with the stock opening with high volume, indicating a strong bullish pattern characterized by higher highs and higher lows. The speaker advises to look for a pullback as a potential entry point for a breakout trade. The importance of observing the 1-minute chart for consolidation and breakout is emphasized, along with the significance of the 15-minute chart for identifying a pullback opportunity. The paragraph concludes with an analysis of the 5-minute chart, which shows an ABCD pattern and strong uptrend, suggesting that buyers are in control. The speaker also notes the bullish hammer candle and the upward-sloping moving averages as positive signals for a long entry. The paragraph ends with a caution about increasing volume and a potential trend change signaled by a break in the 20 EMA, advising traders to protect their profits accordingly.
Mindmap
Keywords
💡Trade
💡Pattern
💡Volume
💡Pullback
💡Breakout
💡Consolidation
💡Stop Loss
💡EMA (Exponential Moving Average)
💡Engulfing Pattern
💡Hammer Candle
💡ABCD Pattern
Highlights
AMD opened with high volume, indicating strong market interest right from the start.
A strong bullish pattern is formed with higher highs and higher lows.
Traders should look for a pullback for a possible opening range breakout entry.
A pullback on the 1-minute chart is a potential entry point for going long.
Setting a stop loss at or slightly below the entry point is crucial for risk management.
Consolidation periods on the 1-minute chart can precede breakouts.
A new high of the day after a breakout indicates a strong uptrend.
A pullback on the 15-minute chart provides an opportunity for a breakout trade.
Traders should set their stop loss at a specific point, like 'V web', for the 15-minute breakout.
The five-minute chart shows a strong uptrend and potential ABCD pattern formation.
Quick recovery from a sell-off indicates buyers are in control, a positive signal for a long entry.
The 1-minute chart confirms a clear ABCD pattern, which is bullish.
Upward-sloping moving averages and a hammer candle are bullish signals for entry.
Volume increase confirms that buyers are in control, validating a green trade.
Taking partial profit at the next resistance level is a strategy for maximizing gains.
A price action break below the moving average (MA) could signal a trend change.
An engulfing pattern on the 5-minute chart may indicate the trend is changing direction.
Losing the 20 EMA suggests sellers are taking control, prompting traders to protect profits.
Andrew's trade example demonstrates a successful ABCD pattern trade with a 66.5% gain.
Transcripts
advanced lesson 3 how to trade
the pattern
AMD opened up with
volume right from the start
as we approach the
can do the price action is creating a
strong bullish pattern higher highs and
higher lows
new 5-minute candle opens look for a
pullback for a possible opening rates
breakout
many times strong ABCD patterns at the
open start with an opening range break
out
here's a pullback on the 1-minute chart
wait to see if the uptrend is going to
hold or sell off before going long for
an opening range break
seems like the upturn is holding this
can be a good entry for long set your
stop loss at or slightly below view app
let's increase the speed to save time
we are getting into a consolidation
period on the 1-minute chart
price is breaking out of the
consolidation in making a new high of
the day
new 15-minute candle has opened look for
a pullback for a 15-minute opening range
breakout as we did earlier on the
five-minute
let's pause here and take a closer look
at what the charts are showing us the
15-minute chart provided a great
pullback for an open range breakout
enter here for a breakout after the
pullback and set your stop loss at V web
the five-minute chart is showing us a
strong uptrend higher high and higher
lows
there are also signs of an ABCD pattern
forming
when the price tried to sell off it was
quickly bought back up good signal the
buyers are in control
the 1-minute chart is all
firming a clear ABCD pattern
know that the moving
averages are still sloping up this
hammer candle is very bullish sign great
signal for an entry
all charts are indicating positive
signals for a long entry
notice how the volume is increasing
confirming buyers are in control
you are in a green trade take partial
profit at the next resistance level
you
the price action has broken the
MA and is headed for the 20
is it a pullback or are we changing
directions
engulfing pattern on the 5-minute could
be a signal that the trend is changing
we are losing the 20 EMA this is no
longer a pullback sellers are taking
control protect your profit and take
what's left of your position off
here is how Andrew traded this ABCD
pattern it was a beautiful ABCD pattern
so as you see us opening a strong 66.5%
having volume and this is what happened
so he came up it didn't open it did a
really nice ABC 900 5 minute chart the
perfect entry would have been we found
on a 1-minute chart so as you see here
so it came up entry for me on AMD was
you know this drop you know it cause
suddenly quickly bought back up that was
the entry for me I went long at 2790 and
you know as you see also came up you
know this is a division 5 minute chart
ready to pop back up 2790 and they see
all the way up to 28 44 which I saw the
last and as you see the 2040 40 or not
to be
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