Candlestick Charts DIDN’T WORK Until I Learned This Easy ONE (1) STEP TRICK

Summary

The 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

00:00

📊 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.

05:01

📈 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.

10:03

💡 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.

15:04

📉 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.

20:07

🚀 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.

25:09

📌 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.

Keywords

💡Candlestick charts

Candlestick charts are a popular method of displaying financial market data, such as stock prices, in a graphical format. Each 'candle' represents a specific time period and shows the opening, closing, high, and low prices for that period. In the video, the speaker discusses the difficulty of learning to read these charts and the importance of understanding their patterns for successful trading.

💡Patterns

In the context of trading and financial analysis, 'patterns' refer to recurring shapes or formations on charts that may indicate future price movements. The video emphasizes the significance of recognizing and trading these patterns with a high probability of success, as they can provide insights into market sentiment and potential trading opportunities.

💡Risk management

Risk management is the process of identifying, assessing, and prioritizing potential risks to minimize or avoid negative impacts. In the video, the speaker highlights the importance of risk management in trading, stressing the need to never risk more than one can afford to lose and to ensure that potential gains justify the risks taken.

💡Stock selection

Stock selection involves choosing which stocks to trade based on various criteria. The video script discusses the speaker's personal criteria for selecting stocks, such as price range, volume, and news catalysts, which are crucial for identifying stocks with high potential for price movement and profitability.

💡Institutionally owned stocks

Institutionally owned stocks are those with significant ownership by large financial institutions, such as mutual funds or pension funds. The script mentions that trading such stocks can be challenging due to the high volume of institutional trading, which can overshadow individual traders' efforts and make technical analysis less effective.

💡Volatility

Volatility refers to the degree of variation of a trading price series over time. In the script, the speaker identifies as a volatility trader, meaning they seek out stocks that exhibit large price swings, as these provide greater opportunities for profit through rapid buying and selling.

💡Catalyst

A catalyst in financial markets is an event or piece of news that causes a significant change in the price of a security. The video discusses the importance of news catalysts for creating high volume and price movement, which are essential for identifying profitable trades.

💡Technical analysis

Technical analysis is a method used in the financial markets to evaluate investments and execute trades through the analysis of statistics generated by market activity, such as past prices and volume. The speaker in the video describes technical analysis as a key component of their trading strategy, allowing them to interpret candlestick patterns and make informed trading decisions.

💡Float

Float refers to the number of shares of a company that are available for trading by the public. In the context of the video, a lower float can contribute to higher volatility and price movement, as there are fewer shares available to meet demand, leading to potential rapid increases in price.

💡Relative volume

Relative volume is a measure of the number of shares traded in a security during a specific time period compared to the average volume over a set period. The script mentions using a high relative volume as a criterion for stock selection, as it indicates significant interest and activity in the stock, often associated with news catalysts or other events.

💡Gapping up

Gapping up refers to a situation where the opening price of a stock is higher than the previous day's closing price, often as a result of market forces or news affecting the stock's perceived value. The video script uses gapping up as an example of a price movement that can indicate potential for further increases, especially when combined with other criteria like high relative volume.

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

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