hey welcome to this video on a day trading setup that used to work in fact
this was one of the first day trading setups that I was taught
it's a traditional setup and I see that it's still taught a lot and I planned
that it doesn't work anymore and basically here's what it is so this
represents YH s yesterday's high and Y L is yesterday's low so the teaching was
all right when we're looking for the market to decide on whether it's going
to be bullish or bearish for the day you look forward to break out of the range
of either above yesterday's high or of course conversely below yesterday is
flow and it makes sense because if it doesn't break above yesterday's high or
below yesterday's low well then when you look at it on a daily chart where each
bar represents one day of price activity it's going to be an inside bar and
that's fine and that happens sometimes and we just get very neutral days so the
thinking is well if we're going to really get a market moving on an
intraday basis where we can really day trade something that's just not going to
move sideways all day we want this thing to really move up and break yesterday's
high or break yesterday's low unfortunately this is a type of breakout
trading and I don't personally find that breakout of a support resistance levels
work very well in and of themselves now you will get
breakouts and but I treat them very differently because we get so many false
breakouts is the point so so many false breakouts now so everything's looking
great markets cranking right along okay and if you said I'm going to trade the
breakout of yesterday's high I've toned too bad right you're making some money
and if you use some good money management you'd probably have a
profitable trade there and but then let's see it starts coming back down
comes back down goes back down comes right back under yesterday is high so as
you can see the green bar yesterday's high the Green Line I should
say so it did get above it it did stay above
it could have been made a little bit of money but did it create a bullish day in
that is the thing no lasted for a couple of hours and a lot of times they don't
even last that long so if you're looking for oh this can be a bullish day you're
going to not be a very happy puppy in fact it goes all the way back down
before the market closes it actually goes all the way back down and breaks
yesterday's low to the downside so it reeked it completely reverses goes all
the way through yesterday's price activity and goes down below yesterday's
low and so then you get a break get down here and then again you could say the
same thing well great okay that didn't work out too good worked out short-term
not long-term it didn't turn into a bullish day in other words
well maybe it's going to be a bearish day after all so when we break
yesterday's low now rainy comes down and then comes right back on up at the slide
okay getting kind of frustrated now and then as you can see it it just continues
to go it goes back above yesterday is low and goes right back into the middle
of the range and guess where we closed we closed in between yesterday's high
and low so it did not turn into after all was said and done it didn't turn
into a bull estate or a bearish day we had a little breakouts to the top we got
to the bottom both essentially failed and could have made a little scalped on
them I suppose but it's not a good technique for determining whether the
day is going to be a bullish or bearish day now here's another example and in
this one it's a little worse the last one wasn't too bad this one's not too
good so we get above yesterday's high and then we come right back down so this
one didn't last long at all so that was just pretty disastrous in other words
when we take a trade we want to get as much reward out of it we want to get as
much movement out of it as possible we don't want just little breakouts and
then it retraces back down and so the point is it's really goes back to the
basic premise of professional trading keeping your
lots of small letting runners run so these breakouts are not creating
situations where we are allowed to letter winners run because they're not
following through very much so here's another option and the option is that
instead of looking for breakouts of yesterday's high and low looking for the
breakout of a different range and so here's yesterday's close and here's your
pivot point or your central pivot based on floor trader pivot formula and what I
do is now see if you look at it for breakout of previous day's high or low
you're already in at extreme right so the markets already made a move and
you're looking forward to really make a big move and sure sometimes that happens
and if it keeps going in your way which sometimes it will then that's great it's
just I don't see it happening as much as it used to so I want to get in early
professional traders we want to get in earlier so the yesterday's close is
essentially let the previous day is market after all was said was done all
the participants decided okay this is what the market was worth you know today
and so that's considered the fair value if you will from that day if you want to
look at be super precise then go ahead look at the settlement and the pivot
point is kind of the same concept that's your mid mid zone kind of the balance of
power if you will and so I look at these two and I take them as a zone as a
neutral zone actually let me draw that a little differently here so drive on the
lines instead of the data there okay so between those two lines I'm considering
that we're really a neutral market we're in a balanced market neither the Bulls
nor the Bears have taken over as opposed to waiting to break above the high
yesterday's high to decide it's a very bullish market or to break below
yesterday's lotus-eyed it's a bearish market so I'm going to make that
decision earlier so now that can improve my reward tremendously because and even
if the market doesn't move as much so well let's just look what happens here
and so once we take a break had trade below in this case we're going we
started above yesterday is close and that's right at the beginning of the
market ok so I wouldn't really trade any of this yet I'd wait for it to get down
below outside of that balance of power if you like to wait for if you do like
breakout trade I guess you could take it right there if you want a week for
throwbacks which is a little safer I think then you can wait for it to
retrace back here to the pivot point or the central pivot and that could be an
entry point and then so great now it goes down down down well see we've
already made some decent money now because there the red line is you can
see that that's yesterday's low down there and as it continues to go let's
see if it breaks yesterday's low it actually does alright but see if we
waited that's at the point now we've already made some good money because we
got in based off of the the mid value or the the ending value of yesterday's
market instead of waiting for to reach extremes so even if it doesn't break
yesterday's low we're still making money if it does though we're just making more
money and in this day again well there you go
breaks yesterday's low it does comes back there's a throw back goes down
stays down there a little bit comes back up but by the time we close it comes
back up above yesterday's low again so this is pretty much a perfect example
and that is what happens more days than not so just real quick review again just
to explain it I like to especially for intraday trading which really that's
what this is all about is to use this zone here between yesterday's closed and
the central pivot or the pivot point as kind of a balance of power so to say and
look for bull markets above it bear markets below it to look for that
directionally now no one's saying it's going to last all day or day traders we
don't expect every day to be uni-directional in fact that's very rare
like it's looking too have a good reward to risk ratio and
this gets you in earlier and so it gives you a better reward to risk ratio and
then on those days when the market does go above the previous stays high
hey you're golden you're in way before the breakout traders and when it does go
below the previous stays low again you're golden you're in way before the
breakout traders there too so I found this works very well and invites you to
check it out with these levels on your charts and check it out for yourself if
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