Candlestick Charts DIDN’T WORK Until I Learned This Easy ONE (1) STEP TRICK
Summary
TLDRThe speaker shares a crucial step in mastering candlestick charts, emphasizing the importance of stock selection over technical analysis. They discuss the challenges of trading large cap stocks like the S&P 500 and Apple due to institutional ownership and recommend focusing on stocks with high volume, news catalysts, and price movements for better trading success.
Takeaways
- 📈 Learning to read Candlestick charts is akin to learning a new language, with each pattern representing a different message that can vary in meaning based on its context within the market.
- 🔍 The speaker emphasizes the importance of stock selection in trading success, noting that focusing on the right stocks can reduce risk and increase profitability.
- 📊 Technical analysis is crucial, but it should be applied to stocks that are likely to move significantly, rather than to those with high institutional ownership that may not show substantial price movement.
- 📉 Even with the best patterns and analysis, there's an inherent risk in trading, and patterns may not always work as expected, which is why risk management is essential.
- 💡 A key realization for the speaker was that focusing on technical analysis alone without considering stock type led to losses, whereas concentrating on volatile stocks improved trading outcomes.
- 💼 Institutional ownership can lead to a lot of noise in the market, making it difficult to discern organic trading patterns from institutional portfolio adjustments.
- 📌 The speaker suggests avoiding trading large-cap stocks like Apple or the S&P 500 for day traders due to their high institutional ownership and less volatility.
- 📈 For volatility traders, focusing on stocks with a float under 20 million shares and a price between $2 and $20 can be particularly profitable.
- 📊 The speaker's trading data reveals that most profits are made from stocks with at least 5 times relative volume and a news catalyst, especially when they gap up by at least 2%.
- 📝 A PDF with the speaker's stock selection criteria is offered to help traders identify the right stocks to focus on, emphasizing the importance of demand and supply dynamics.
- 🚫 The absence of a clear news catalyst can be a red flag when trading, as it may indicate a lack of organic buying pressure behind a stock's movement.
Q & A
What was the speaker's initial difficulty with learning to read Candlestick charts?
-The speaker found learning to read Candlestick charts extremely hard initially, until they learned a specific step that made understanding the charts and recognizing patterns much easier.
What does the speaker compare learning to read Candlestick charts to?
-The speaker compares learning to read Candlestick charts to learning a different language, highlighting that it is a visual language with different shapes communicating various messages.
Why did the speaker initially focus on trading the S&P 500 and Apple?
-The speaker, as a beginner, believed that by focusing on well-known entities like the S&P 500 and Apple, they could get to know how they traded and essentially how they moved, which would help in understanding their trading patterns.
What is the importance of stock selection in trading according to the speaker?
-Stock selection is crucial in trading as it helps to reduce risk by focusing on stocks that are more likely to yield profitable trades, especially those with high volatility and the right catalysts.
What is the speaker's approach to risk management in trading?
-The speaker emphasizes never risking more than what one stands to gain in a trade. They advocate for a one-to-one profit-to-loss ratio and a minimum of 50% accuracy to break even, which helps in managing risk effectively.
What are the key criteria for the speaker's stock selection?
-The key criteria for the speaker's stock selection include price between $2 and $20, at least five times relative volume, a news catalyst, and a float under 20 million shares.
How does the speaker describe the impact of institutional trading on stock movements?
-The speaker describes institutional trading as having a significant impact on stock movements, often causing large price swings due to portfolio adjustments and position management, which can overshadow organic retail trading activities.
What is the significance of a stock's 'float' in the speaker's trading strategy?
-The 'float' refers to the number of shares available to trade, and a lower float signifies a smaller supply. The speaker looks for stocks with a float under 20 million shares, as these can lead to significant price movements when demand surges.
How does the speaker explain the concept of 'gap up' in the context of trading?
-A 'gap up' refers to a stock moving higher than it closed the previous day, ideally by at least 2%. The speaker considers this a positive sign, indicating strong demand and potential for further upward movement.
What is the speaker's advice for traders who are struggling with technical analysis?
-The speaker advises traders to focus on the right type of stocks to trade, those with high volatility and clear catalysts for movement, rather than trying to trade stocks that are range-bound or have low volatility.
What did the speaker learn about the limitations of technical analysis when applied to certain types of stocks?
-The speaker learned that applying technical analysis to stocks with high institutional ownership, like the S&P 500 or large-cap tech stocks, can be challenging due to the influence of institutional trading and lack of organic retail trading activity.
How does the speaker describe the role of news catalysts in stock trading?
-The speaker describes news catalysts as essential for creating demand and driving stock prices up. News can trigger high-frequency trading algorithms to execute buy orders, leading to increased volume and potential price surges.
What is the speaker's view on the importance of trading volatile stocks?
-The speaker views trading volatile stocks as key to finding success in the market. They argue that focusing on stocks with significant price movements allows traders to capture parts of large moves, even if it's just a small percentage of the overall volatility.
Outlines
📊 Overcoming Challenges in Reading Candlestick Charts
The speaker shares their personal struggle with learning to interpret candlestick charts, highlighting a pivotal step that dramatically improved their understanding. They emphasize the importance of recognizing patterns with high probability for success and trading with consistency and confidence. The speaker also discusses the common mistake of trading large-cap stocks like the S&P 500 without considering the need for significant moves to profit from options trading, given the spreads involved. The analogy of learning to read charts as learning a new language is made, with the speaker sharing their own difficulty with language learning and how it parallels chart interpretation.
📈 The Impact of Institutional Trading on Stock Patterns
This paragraph delves into the influence of institutional trading on stock movements, particularly for large-cap stocks and indices like the S&P 500. The speaker explains how the majority of daily transactions involve institutional portfolio adjustments rather than organic retail trading, which can obscure clear patterns for individual traders. They also touch on the interconnectedness of stocks and external factors, such as the inverse relationship between oil prices and airline stocks, and the broader implications for technical analysis when contextual market factors are ignored.
💡 Stock Selection Criteria for Effective Trading
The speaker introduces their stock selection criteria, which is crucial for reducing risk in trading. They share their experience with trading stocks with high institutional ownership and how it led to unpredictable outcomes. The speaker advocates for focusing on stocks with specific characteristics, such as high relative volume and news catalysts, to increase the likelihood of profitable trades. They also mention providing a PDF with their stock selection criteria for viewers to use as a reference.
📉 Risk Management and the Importance of Stock Selection
The speaker discusses the fundamental principles of risk management in trading, advocating for a one-to-one profit-to-loss ratio and a minimum of 50% accuracy to break even. They share their own trading data, highlighting the price range and volume that have yielded the most profit for them. The speaker also explains the importance of trading stocks with a float under 20 million shares, as this can lead to significant price movements due to supply and demand dynamics.
🚀 Capitalizing on Volatility with the Right Stock Selection
In this paragraph, the speaker describes how focusing on volatile stocks with the right criteria can lead to substantial trading profits. They share a specific example of a stock that experienced a significant price increase due to a news catalyst, high volume, and a small float. The speaker also explains the role of high-frequency trading algorithms in liquidity and market volatility, and how their actions can contribute to rapid price changes.
📌 Technical Analysis and Its Role in Successful Trading
The speaker underscores the importance of technical analysis in conjunction with the right stock selection. They discuss various elements to consider, such as price, volume, news catalysts, and float, to identify stocks with high potential for movement. The speaker also provides insights into how to interpret candlestick patterns, like the significance of upper and lower wicks, and how these patterns can indicate the presence or absence of sellers' control.
🌐 The Power of Focusing on Volatile Stocks
The speaker concludes by reflecting on their trading journey, emphasizing the breakthrough that came from focusing exclusively on volatile stocks. They share how this focus allowed them to achieve their daily trading goals more consistently and how it improved their ability to read candlestick charts. The speaker encourages viewers to use their stock selection criteria as a foundation for their trading practice and to approach trading with an understanding of its inherent risks.
Mindmap
Keywords
💡Candlestick charts
💡Patterns
💡Risk management
💡Stock selection
💡Institutionally owned stocks
💡Volatility
💡Catalyst
💡Technical analysis
💡Float
💡Relative volume
💡Gapping up
Highlights
Learning to read Candlestick charts was initially difficult but became easier after understanding a specific step.
The importance of recognizing the right stocks to trade for successful trading with Candlestick patterns.
Trading large-cap stocks or indices with high institutional ownership can be challenging due to their price movement being influenced by institutional adjustments.
Options trading requires significant moves in the underlying asset's value for profitability, especially considering the spreads.
Learning to read Candlestick charts is akin to learning a new visual language that conveys different messages based on the chart's context.
Technical analysis performed in isolation can be misleading; it's crucial to consider the larger market context.
Stock selection criteria are essential for reducing risk in trading and focusing on the right stocks.
A PDF with stock selection criteria is provided to help traders evaluate potential trades effectively.
Volatility trading involves making money on stocks that exhibit significant movement, which is different from trading large-cap stocks with minimal percentage changes.
Risk management is fundamental in trading; one should never risk more than they stand to gain.
The presenter's trading data analysis reveals insights into profitable trading strategies, including the sweet spot for stock prices and volume.
High relative volume and news catalysts are indicators of potential profitable trades.
Float under 20 million shares is a criterion for stock selection, indicating a smaller supply that can lead to significant price movements.
High-frequency trading algorithms can affect market liquidity, especially during volatile periods when they may withdraw, leading to price surges.
Technical analysis is vital for identifying entry and exit points in volatile stocks, as showcased with the example of a stock experiencing a significant price increase.
The importance of focusing on stocks with high volatility for active traders seeking to capitalize on market movements.
A shift in trading strategy to focus only on stocks that exhibit significant movement led to improved trading results.
The presenter emphasizes the risk involved in trading and advises taking it slow, using the provided stock selection criteria as a foundation.
Transcripts
[Music]
learning to read Candlestick charts was
extremely hard for me when I was getting
started until I learned this one very
specific step and once I started taking
that step it was like the water broke
through the dam and finally I was able
to see the charts clearly I was able to
see the patterns that I knew had the
highest probability of success and I was
able to trade them with consistency and
confidence now what I'm going to share
with you is not something that I read in
a lot of the books that help teach you
how to read Candlestick charts and I I
worry that maybe I've neglected to
emphasize how important this step is in
some of my previous videos because I was
just looking at a comment and one of you
guys asked a question it was on a video
where I was breaking down and dissecting
the anatomy of a very specific
Candlestick pattern and one of you guys
asked you said Ross I I saw this pattern
in in the wild in real time on a chart
and I took the trade and it was a
perfect pattern but I lost it didn't end
up working and I don't understand why
can you look at the chart and I said a
shirt I want to look at that cuz I want
to understand you know where was the
disconnect here now truth be told even
the patterns that have the highest
probability of success might only work
75 to 80% of the time so there's always
going to be that margin where you've got
the right idea but the pattern just
doesn't work and that's okay but I took
a look at the chart and they shared with
me a chart of the S&P 500 and I thought
right away I was like okay see here's
the problem you're trying to trade the
S&P 5 00 and this is what I'm going to
say when I was getting started as a
beginner Trader I had the idea that I
should just trade the S&P 500 and I
should just trade Apple every single day
I should get to know how those how they
traded essentially how they moved and
just trade them every day and even
though I couldn't afford to buy them
outright I was trading them using
options so I was buying calls and buying
puts and I remember a time where I
pulled up my chart and this is a chart
of Nvidia but we could just as easily
pull up um apple or we could pull up the
S&P 500 and I remember pulling up the
chart and sitting here and looking at it
and thinking you know what I don't see a
thing I don't see any obvious buy or
sell signal I don't see anything here
that makes sense now something that's
worth noting is if you're trading large
caps you're trading the S&P 500 and
you're trading options you need fairly
big moves in the value of the underlying
asset in order to have a good profit
especially because a lot of options
contracts have larger spreads that's the
difference between the bid and the offer
so in other words if you're right and
the stock goes up or down like 15 20 30
cents that's not going to be enough to
make any money on the options trade so
essentially for me for the way I was
trading those I was looking for big
moves and as I was sitting down on this
one day I was looking at my charts and I
just I I put my hands up in frustration
because I didn't see a thing something
that I've learned about myself is that I
have a really hard time learning
languages this was something that was
incredibly difficult for me in school
you know other people like picked it up
really quickly and for me it was a
struggle and what I've come to realize
and recognize is that learning to read
Candlestick charts is like learning a
different language I'll give you an
example it's a visual language in a lot
of ways so right now I know the
difference in uh the meaning behind each
of these shapes each one of these
communicates a different type of message
to me and it the message is different
depending on where these shapes occur
where they occur at the top of a move
they occur at the bottom of a move or
they occur during a period of
consolidation so I've sometimes joked
that you know a thousand years from now
when like I don't know stock market's
obsolete people look back at our you
know Wall Street and they'll be like
what are these like these are like
hieroglyphs what were they doing what
were they thinking um you know these
charts that we put so much emphasis into
right now but for us it it really is a
language and so what was important for
me to learn this language and to get
really good at performing technical
analysis which for me in my trading
really does give me an edge I had to get
good at understanding the subtle
differences of when these specific
shapes carry meaning and when they don't
so when we try to trade something like
the S&P 500 or we're trading Apple one
of the things that I've learned is that
these stocks or indices have very high
levels of institutional ownership
they're also included in many different
mutual funds and so what that means is
that every single day a huge percentage
of all the transactions that are going
through the market are just based on
institutional Traders adjusting
portfolios for their clients mutual
funds adjusting port folios buying and
selling and it's actually a very small
percentage that is I would say organic
retail Traders buying and selling and so
something that's really incredible to
watch in the market is that when the S&P
500 is moving down you can look at 15
other stocks and see that they're doing
actually the exact same thing or you'll
realize that some stocks have inverse
relationships when oil goes up Airlines
go down when when oil goes down Airlines
go up because they have this
relationship where the price of oil
affects the profitability of these
Airline stocks and so once I realized
that there were these sort of deeper um
deeper elements at play in the market it
helped me understand why performing
technical analysis on some of these
stocks was so difficult because when
you're performing your technical
analysis and you're looking at your
Candlestick chart this is kind of in an
isolated bubble you're looking at this
very specific stock and you're like okay
I'm looking at this bare flag or I'm
looking at this flat bottom breakdown or
this flat top breakout or whatever
whatever the case might be but to take
it out of the context of what's
happening in the larger market so on so
forth you may end up taking a trade and
then all of a sudden at you know 1 p.m.
there's a Federal Reserve announcement
and boom all of a sudden the stock
starts making this huge move and it was
unexpected for you because you were too
tunnel vision you were too zoomed in so
this is what I learned reading
Candlestick charts for me got easier
once I realized the type of stocks that
I made the most money on this comes back
to stock selection so to reduce our risk
in trading recognizing that of course
trading is risky I I've learned that I
can reduce my Risk by focusing on the
right stocks to trade when I try to
focus on trading Apple Microsoft Nvidia
these stocks with huge percentages of
institutional ownership I get chopped
out by the algorithm and just by the the
position adjustment of these big
portfolios moving in and moving out of
the market you know you might have one
client who said liquidate a $500 million
portfolio I want to go buy a yacht or
whatever and now their portfolio manager
is like okay I got to start selling they
start selling and all of a sudden that's
creating these big candle wicks on the
chart and you're like why is this
happening I don't understand it and it's
happening just because of something
that's completely out of your control
now I'm actually going to put a link um
for a PDF in the comments it'll be
pinned at the top of the comments and
it'll be linked in the description it's
a PDF for my stock selection uh criteria
and you can download this and I
encourage you to download it you can
print it out you can have it on your
desk and when you hear somebody talking
about a stock or you're seeing something
that's popping up you're seeing it on
the scanners or however you're coming
across it run that by that checklist and
ask yourself how closely does this meet
the criteria that Ross has set up now of
course it's the criteria that I use but
this is what I look for in order to
consider if something is worth trading I
feel like this for me helps me reduce my
risk because it helps me avoid stocks
that are more likely to have a high
degree of institutional ownership are
more likely to cause me to get chopped
out where I'm going to get frustrated
and then emotional have unnecessary
losses so download this stock selection
uh criteria PDF you can print it out
have it next to your desk and just use
this kind of a reference to gut check
like am I focusing on the right stuff
each day so what is the right type of
stock to trade for me I'm a volatility
Trader which means that I make money
trading things that move I don't make
money buying something at $5 and selling
it at $5 and make money money selling
buying something at five and selling it
at eight nine 10 or higher and if I
could do that in one day I'm going to be
very happy now today we had a few
examples of stocks that made those kind
of moves GA was one of them this stock
went up about 180% this morning and so
you can see this pattern right here now
this right here was bucking the trend of
the overall market and this is a f
minute chart but we can zoom in on the
one minute chart to get a little bit
more dialed in and I can show you my
exact entry so this was the this was
bucking the trend of the overall Market
the overall market today was actually
pulling back a little bit but this is a
stock that had a catalyst this is a
stock that had a reason to make a big
move and because of that news Catalyst
it had volume it had volatility it had
the rate of change that I look for and I
was able to capture profit so to put my
money where my mouth is you can see I'm
up $641
1640 trading zpp now I'm not going to be
green every single day and I'm not going
to be green on every single stock I
trade so I want you to understand that
when I'm teaching you some of these
patterns that I really like even me with
years of experience there's no such
thing as being right 100% of the time
that doesn't exist in trading I know a
lot of you look for that certainty you
want to be right 100% of time you never
want to lose and I get it cuz I was like
that too when I got started it actually
sent me on what I would call the hunt
for the Holy Grail I was looking for the
perfect combination of technical
indicators that would basically
guarantee I would never lose money and
after spending years searching I
realized it doesn't exist not for retail
Traders like you and I the people who
make money every day maybe are the
Brokers right but but not retail Traders
we have to fight it out we're on the
ground floor here we're in the weeds but
if we find a pattern that works more
often than it doesn't and we're able to
keep our losses really small we can
develop an edge in the market and that's
exactly what I've been able to do so
let's talk about the criteria for the
right stock to trade because in terms of
setting a foundation for for success as
a Trader number one you've got to
understand risk management and risk
management to me is at at its base
understanding that you should never risk
more than you stand to gain as a Trader
so if you're going to risk a th000 you
better have the potential to make at
least a th000 if not 2,000 or 3,000 that
alone can save you all kinds of
heartache and frustration because I
can't tell you the number of traders who
have come to me and they said oh I lost
$5,000 on this trade and I'll say well
what was your stop what was your max
loss when you took the trade and what
was the most that you could have made if
it worked out well not being like
unrealistic but like realistic
expectations how much did you stand to
gain and they'll be like oh well when
you put it that way only like $1,500 but
they lost five grand right so totally
mismanage mismanaging their risk so if
you can understand number one that in
trading never risk more than you can
stand to gain that's step number one
step one all right so we we want to have
one to one profit to loss ratio and
minimum is 50% accuracy in order to be
Break Even anything above that is going
to be positive number two stock
selection and then number three is the
technical analysis right technical
analysis of actually reading the
Candlestick charts right so number two
stock selection for me what I found and
this is based on years of my own trading
data so I've gone through all of my data
and I can share it with you here just
really briefly just to kind of give you
a sense of how how much data we're
looking at so if we step back here this
is going to be oh let's see we're going
to clear this out I'm going to have
about 11.2 million in gross profit here
now I'll say right now my results are
not typical you shouldn't assume that
you're going to make the same amount as
me but this is important to learn from
someone who's proven profitable I have
this track record and it is real money
so with $1.2 million of profit let's
look for a second um at uh price and
volume so this is telling you the price
stocks I make the most money right so
okay so all right so we're we're trading
between $2 generally and 50 and you can
see the sweet spot for me is really
between 2 and 20 that's the spot where I
make the most money so let's start sort
of outlining this as stock selection
number one price so we're going to do
price and we'll just we'll flip it over
to this side here we'll start fresh all
right so stock selection so number one
price between 2 and 20 that's my sweet
spot now I'm not saying that I don't
make money when I trade stocks that are
a little more expensive or a little
cheaper but this is my sweet spot
between 2 and 20 where I do the best as
a beginner it seems to me that it would
make sense to focus on the sweet spot
where other Traders are doing their very
best rather than trading sort of the
edges of where they find success right
so number one price between 2 and 20 all
right now something that's very
interesting here we can look at um
instrument and we're going to scroll
down here when this loads we're going to
look at perform performance by
instrument relative volume and what
you'll see here is that the performance
by the instrument relative volume it's
very clear right down here so what does
this mean what this means is that the
majority of my profit is on stocks I
have 500 times higher volume today than
their 50-day average that means today
they have high volume relative to normal
what's the cause of high volume
typically a catalyst so let's start
plugging this in all right number two
five times
relative volume this is a measurement
that we can get from scanners number
three news
Catalyst all right number four all right
so we're going to go number four here
and if we scroll down here what we're
going to see is that uh performance by
instrument movement and performance by
opening Gap the majority of the profit
is when stocks are gapping up at least
2% gapping up means moving higher than
they closed the previous day so up
10% so if I just apply these four things
right here these are going to eliminate
how many
losers thousands and thousands of losing
trades I can completely eliminate I'm
not even going to consider it if the
stock doesn't fit within my price range
with the relative volume up at least 5%
on the day I prefer 10% or higher I'm
not even going to trade it so the S&P
500 no trade Apple no trade Nvidia on
most days no trades now I'm not saying
that there aren't exceptions to this
rule there are going to be days when
Nvidia has news and makes a huge move
and it's it's worthwhile considering
there's days where Apple has news and
it's worth considering those are days
where the prices outside are my focus
area but it's got the the relative
volume it's got the news Catalyst maybe
it's not up 10% but it's up four or
five% and for a large cap stock all of
that could could support considering an
entry now one of the fifth things I look
at is
float under 20 million shares and lower
is better float is the number of shares
available to trade so when a company
does their initial public offering they
sell shares onto the open market from
that point forward that's the float so
what we've actually done here is we've
just created a list of demand and Supply
also known as supply and demand so now
let's think about this for a second so
we've got Demand right here
and demand initially is created first by
news then by the stock going up 10%
which then will bring in 5 times
relative volume right all of a sudden
now it's moving and usually stocks
between 2 and 20 are going to show
bigger percentage returns
Supply this is the number of shares
available to trade so let's say the
float is 20 million shares and let's say
on this particular day it the stock has
100 million shares of volume so 100
million shares of demand vers verus 20
million shares of Supply what do you
think is going to happen you're going to
have a huge move that's what we like to
see so now let's go back and look at
this stock today that I traded so we're
going to pull back this um graph right
here I'm going to move that out of the
way so um zap zpp this has a float of
4.29 million shares that's that's the
amount of shares available to trade 4.29
million this is a relatively small cap
company right the total market cap of
this company4 million time $3 a share so
this is not this is not a high price
company in terms of market cap today it
traded an incredible 91 million shares
of volume now I always think that this
is pretty amazing because in fact today
it traded the entire market cap the
entire float traded multiple times
people bought people sold people bought
people sold this traded well nearly
let's see 270 $300
million of stock tra traded hands why
did it cycle so quickly because we had
news we have news we have the percentage
return we've got that brings in the
volume what really starts all of this
the chicken or the egg it begins with a
news Catalyst you get the news Catalyst
that comes out and you have these high
frequency trading algorithms that
respond to news instantaneously they
instantaneously execute buy orders and
when other algorithms see this surge of
buy orders coming in they pull their
orders off the market because they don't
want to accidentally short a stock
that's suddenly spiking up and without
those sell orders holding it down all of
a sudden the stock start squeezing so
something that's kind of interesting is
that there's a misconception that high
frequency trading algorithms create
liquidity in the market they do but not
when the market becomes volatile because
when the market gets volatile they step
back because they don't want to lose
money so they turn off all those buy and
sell orders are gone and so now the sell
orders that would have created
uh sort of a level of Supply overhead
Supply they're gone and now the price
can Skyrocket and that's what we've seen
in fact I've seen stocks that have gone
from $2 to5 $25 in a matter of 15
minutes which is absolutely incredible
when it happens now in order to fully
capitalize on those types of stocks no
doubt you need to be an expert at number
three technical analysis right step one
understanding risk step two is stocks
selection step three is technical
analysis now by the way if you want to
download my stock selection PDF I'm
going to put the PDF it's a PDF that you
can download I'm going to put the link
in the description and I'm going to pin
it to the top of the comments so this is
going to break down my criteria for
buying a stock the demand and the supply
and it's going to make it it's it puts
it in a nice format so you can download
it you can print it out and you can put
it right next to your desk I really
encourage you to do that because in my
opinion in order to have success you
need to be trading the right stuff and
this is the biggest mistake so that
member or that subscriber that made that
comment about the stock that they were
looking at was S&P 500 and I was like
well you know but here's the problem
you're trying to trade something that's
range bound it's not moving and no
wonder you're going to get chopped up
you know what the pattern you saw that
big green candle that created the bull
flag that could have just been one
institutional Trader executing an order
for a client there wasn't a catalyst
behind it that carries meaning so what I
mean by that is when we're looking at a
stock that has the potential to make a
big move you know I'll just sort of go
like this why is a stock going to go up
15 20% like that I'll do it in a
different color so it's easier to read
why is a stock going to make a big move
like this you know One initial pop and
then back down it's a catalyst why are
people going to buy this pullback
because when we're looking at a bull
flag we're looking at Green candles up
up up and then we look at the red candle
pulling back right here red candle
pulling back and then we look for the
next candle to come in for the next leg
up but why are people going to buy for
that next leg up they're not going to
buy for that next leg up if they don't
think this has the potential to make a
big move what gives it the potential for
that big move is when you have the news
Catalyst now I will say that there are
some exceptions to this you can for
instance have a stock that suddenly and
we don't always know why squeezes up 25
30% or 40% something like that it makes
a huge move now it could be because an
Institutional Trader decided to take a
position but they took such a big
position that they move the stock up 30%
okay so now suddenly we're looking at
the stock and it's up 30% and we're like
well gez this meets our criteria it
doesn't have news but it's up 30% it
already has five times relative volume
it's the right price and the floats
right so the absence of news in this
case I I can tolerate it as long as we
have everything else so there are times
where I'll take those trades and at that
when when that's the case I'm doing the
same level of technical analysis I'm
pulling up the chart and I'm saying okay
well where's the pullback so if we look
at this um I'm actually going to zoom in
on this micro time frame here so on zap
this had an amazing little micro
pullback um right at
$2.50 uh it was an ascending wedge right
here so that was the spot and see how
this was ascending support so what I
often will do is I'll actually draw this
kind of ascending support trend line
like this and then we've got this flat
top right here right underneath the
psychological resistance of the half
dollar and it finally pushes away and
this thing squeezes from 250 straight up
to three halts up because it's so
volatile it opens it pushes even higher
and next thing you know we're hitting a
high of 380 but notice this candle right
here so what do we know about that
candle see now this is where we're
applying what we're learning about the
language of technical analysis we know
that this candle has a very tall upper
candle wick so how are upper candle
wicks created an upper candle wick is
created when the price and I'm just
going to use this orange just for the
just because the quickest to grab so the
price squeezes up and if it closed at
the high you've got a very bullish
candle price is going up right but if it
squeezes up and then the sellers p push
it back down and it closes like this
that shows that sellers were in control
so now in this moment the sentiment is
weak now I know how to read that candle
I know what this topping tail means this
is bearish bearish weak not good if
you're long now the opposite of a
bottoming tail a bottoming tail is
bullish and is strong we usually like to
see that uh so in any case as I saw that
topping tail candle I thought all right
well that's not great to see this is
probably going to be the high of day but
it may come back up and retest it and
form a double top that's a double top
right there this was potentially going
to form a cup and handle pattern for a
move higher but it didn't now all of
this technical analysis is worth
performing because we're looking at
something that has volatility we're
looking at something that's moving
that's what's important so if we look at
some of the other stocks today that were
volatile This was um Z AL this is one
that's currently up
136% we back this chart out here and
you're going to see again this is the
type of thing that you want to be
looking at you want to look at these
candles you want to look at them at the
1 minute you want to look at them on the
10sec look at it on the 5 minute check
the daily when you have something that
goes between a120 and 350 there's a lot
of opportunity here even if you only
capture a little sliver of it getting in
at 230 and selling at 250 or 260 a
little sliver of this huge move that's a
10% return right there you're not going
to get 10% returns trying to day trade
apple or Nvidia or the S&P 500 again
unless you're trading options and it's a
day where the price is particularly
volatile but that's not the case on most
days so one of the things for me that
was really like helped me have a
breakthrough was the realization that
focusing exclusively on technical
analysis without thinking about the
right type of stock to trade was
resulting in me getting chopped out and
losing money I was losing money I was
struggling once I realized the type of
stocks that had the biggest moves were
the ones I was making the most money on
I decided to only perform technical
analysis on those I left everything else
behind and guess what things started to
improve I started seeing stocks that
were going up 30 40 50% and even though
I was only capturing a little piece of
that move 10 cents here 15 cents there
boom with 1,000 shares it's 150 bucks
another 15 bucks now I'm up 200 on the
day that was my daily goal when I was
getting started and I found it was a lot
easier to hit my $200 daily goal when I
was trading stocks going up 40 50 100%
than by trying to trade things that are
going sideways so if you're someone
who's been trading cryptocurrency you'll
know that trading the ones that are the
most volatile is where you're going to
find success you trade cryptocurrencies
like Bitcoin volatile but a lot of chop
very difficult to perform technical
analysis you want to trade Forex some
currency pairs are going to be more
volatile than others you want to trade
Futures there are certain days of the
week certain week days out of the month
where individual future contracts are
going to be more volatile than others as
active Traders we hunt for volatility
but we have to be managers of risk so at
the end of the day I'm thinking about my
risk and I feel like I reduce my risk as
a Trader by only trading things that are
moving when I get bored and I start
looking at Tesla or Nvidia because while
they're moving in dollars per share this
the percentage it's not there and that's
when I end up struggling that's when I
end up getting chopped up that's when I
end up losing money so the big lesson
that made Reading Candlestick charts a
lot easier for me was recognizing the
right type of things to trade for me
it's stocks so I hope you download my
stock selection PDF it's going to break
down the type of stocks that I like to
trade every single day and I think if
you set this as sort of part of your
foundation practice trading these in the
simulator see what happens I think
you'll be impressed now as always I'll
remind you trading is risky and my
results aren't typical so take it slow
and look if you enjoyed this episode I
hope you hit that thumbs up I hope you
subscribe and I'll see you for the next
upload real soon
[Music]
تصفح المزيد من مقاطع الفيديو ذات الصلة
5.0 / 5 (0 votes)