Part 3: For Positional Stock Traders (The Buy Range + SL + Target Levels)

Summary

This video series provides a step-by-step guide for positional traders who focus on weekly charts and seek stocks with strong fundamentals. In part three, the focus shifts to setting up and drawing crucial price levels on a chart. The presenter demonstrates how to identify and plot buying ranges, stop-loss zones, and selling zones using pivot points. Emphasizing the importance of gradual buying and disciplined trade execution, viewers learn to manage risk by starting with smaller positions and scaling in as the price progresses. The approach is designed to minimize emotional decisions and ensure a strategic trading methodology.

Takeaways

• 😀 This video series is targeted at subscribers and students who prefer to trade weekly charts, focus on positional trades, and aim for stocks with strong fundamentals.
• 😀 In Part 1 of the series, the video discussed setting up a weekly chart layout and saving it for further analysis.
• 😀 Part 2 covered the key factors for positional traders, emphasizing that they don't need to be glued to their computers and should focus on scanning stocks, plotting price levels, and acting when prices reach certain zones.
• 😀 The video discusses how to set and draw price levels on a weekly chart, starting with identifying the buying, selling, and stop-loss ranges.
• 😀 The MarketSmith platform provides a clear buying and selling range, with a pivot point and guidelines for entering and exiting trades.
• 😀 The video emphasizes not getting caught up in pattern recognition (e.g., cup with handle, double bottom, etc.), as MarketSmith provides pivot points and clear price levels for buying and selling.
• 😀 The buying range is 5% above the pivot point, while the stop-loss range is 5-8% below the pivot point.
• 😀 When buying, it's advised to gradually build your position instead of buying all shares at once, starting with half the planned size and increasing if the stock sustains its price movement.
• 😀 The selling range is calculated at 20-25% above the pivot point, with a green zone indicating a target for selling.
• 😀 Positional traders should always remember that the stop-loss and buy ranges are calculated relative to the pivot point, with adjustments made for average execution prices.

Q & A

What is the primary focus of this video series?

The video series focuses on teaching positional traders to use weekly charts, specifically those who want to trade stocks showing fundamental strength and prefer not to watch price movements continuously.

What was covered in part one of this series?

In part one, the video covered the weekly chart layout, including the settings and how to save the chart.

What did part two of the series address?

Part two explained the important factors to consider for positional traders, such as the need to scan for stocks and take action only when price enters predefined buy or sell zones.

Why is a weekly chart recommended for positional traders?

Weekly charts allow traders to avoid sitting in front of their computers continuously, as the time frame offers enough space for making decisions based on price movements without needing constant monitoring.

What is the role of MarketSmith in the trading strategy presented in the video?

MarketSmith provides key price levels such as the pivot point, buy range, and stop-loss range, allowing traders to avoid learning complex patterns and focus on these predefined levels for execution.

What is a pivot point and how is it used in the video?

The pivot point is the price at which a trader is advised to buy a stock. In the video, it is calculated from the high of a specific candle, which is used to determine the buying, stop-loss, and selling ranges.

How is the buying range calculated?

The buying range is calculated as 5% above the pivot point. For example, if the pivot point is 87.95, the buying range is 92.34 (87.95 * 1.05).

What should a trader do when the price enters the buying zone?

When the price enters the buying zone, a trader should not buy all the shares at once. Instead, they should start with a smaller position and gradually increase the position size as the price sustains within the buying band.

What is the importance of buying gradually?

Buying gradually helps minimize risk. Starting with a smaller position allows traders to assess the market and ensure the price continues to move in the desired direction before committing more capital.

How is the selling range determined in the strategy?

The selling range is determined as 20% to 25% above the pivot point. For example, a pivot point of 87.95 would result in a selling range between 105.54 and 109.93.