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day trading

Breakout Trades and High Volume Trade Spikes Video

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Breakout Trades and High Volume Trade Spikes

As individual traders, one of the key strategies we use is breakout trades. These are a key edge we can use because they allow small share traders to get in at the key pivot points in the market. We can use price action alalysis to find key levels of S&R in the market, and enter as they are broken.

On top of this, we watch the level 2 on a trade to see price ceilings/floors eaten up by orders before we choose to trade. This is a key advantage of taking a smaller size in the market. When we see a seller with 50k shares on the ask, we can time our entries as they are getting eaten up.

 

Why these levels?

When we are searching for breakout trades, we must identify key price action levels. These levels are agreements between buyers and sellers in the market. With each agreement of highs and lows, there are key levels outlined in the market. At each point in time the market turns, a level is formed. When these levels are re tested, they gain strength. This is assuming the re test was followed by a move away from the price point.

breakout trades trading
breakout trades from the daily chart

What about minor re tests of price action levels?

We need to clarify the difference between a re test, and a weakening of a key price action level. When a market comes down to re test a level in the market, two things can happen. One is where the market bounces off that level, re enforcing it. The other is when a trade tests that level multiple times on a lower time frame, weakening that level. With the latter, the price keeps re testing, each time weakening the level.

How can we use the difference between these two type of level testing?

When we see a key price action level being tested, we know it is prime for a breakout trade. These levels have been proven over time, and when broken will have an accumulation of traders willing to sell/buy.

The breakout trade moment:

When a key price action level is broken. Technical traders jump at the opportunity to make money. They see these levels in the sand drawn around areas where traders not only want to buy/sell, but want to exit their existing positions. This doubling effect is the key in breakout trades. You have an accumulation of both traders who are profitable, and traders who want to be profitable watching the same level. When that level is crossed. A volume spike appears. This is created by both stop orders, and new traders coming into the trade.

Candlestick Patterns: Simplify Your Charts Video

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Candlestick Patterns: Simplify Your Charts

We’ve gone into detail on Technical Analysis strategies. One difficulty traders have is identifying key Candlestick patterns in the market. The highs and lows pattern is easy, but it rarely appears so cleanly on our charts. We are faced with candlesticks that form patterns with ticks outside of key areas.

One key addition to our analysis we can do is use the theory of Encompassing Candlesticks. These are formed when their highs and lows are greater than surrounding candlesticks. This is true for candlesticks before or after encompassing candlesticks. When a market is wide ranging, the specific highs and lows within this range become less important. These price levels are broken, and therefore are less significant. This is true for large swings in the market and down to each individual candlestick.

 

Why Use These Candlestick Patterns?

Candlestick patterns
Candlestick patterns with encompassing candlesticks

When we are able to remove 2 or even 5 candlesticks, it simplifies the price action on the chart. While we are removing information, the inside candlesticks are less important to our analysis. We can choose to ignore them, or take them into account. If we choose to ignore these candlesticks, patterns may start to appear. If we choose to keep these candlesticks in our analysis, we can weight them differently.

We can use these modified charts to clarify our technical analysis on the charts like in the next video here:

Trading Support and Resistance

Fundamental Trading: Preventing Losses Video

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Why you need to pay attention to Fundamental Trading no matter how you trade:

The two common different sections of trading are Fundamental trading and Technical trading. Now I work normally as a technical trader. A trader who analyzes chart patterns to determine possible entries and exits from the market. Even though I trade technicals, fundamental trading is part of my strategy. Fundamental trading helps me prevent unnececary losses while only improving my trade chances. It is a no loss addition to a trading strategy. This is because a quick fundamental analysis can be added on to your trading, providing you with a clear overview of the markets.

We need to pay close attention to key fundamental trading signals in order to minimize losses. These signals are in the form of key news announcements, market wide effects, and inter connected markets. In this video, we show how traders who ignore these fundamental trading signals would face unexpected trading losses.

Why this obvious example of post election trading on the ES500?

[Read more…] about Fundamental Trading: Preventing Losses Video

Understanding Price Action Trading Video

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Understanding Price Action On Your Charts:

Price action takes patterns from your charts that are seemingly random, and uses easy methods to break them down. We break down what are key points in the market, and base trades off of these. Understanding price action is not complicated since it it simply analyzing previous information. You are using previous patterns to trade the current market. In this video, we focus on the highs and lows pattern. This pattern monitors the swings with higher highs and higher lows to determine market direction and potential entries and stops. Whenever we get swings in the market, we mark them down. This gives us a clear path of the trade as well as potential resistance and support levels. We monitor these swings in the market (highs and lows), and base future trade outcomes off of them.

Understanding price action with highs and lows

Our main way to decipher price action on a chart is identifying the highs and lows in the market. We mark off the highs, and the lows on every chart as per our rules for trading highs and lows. Additionally we rule out any false highs and lows by only selecting ones that are relevant. These Relevant highs and lows are ones that broke previous levels.

understanding price action with highs and lows
Price action outlined with highs and lows

Highs in the market:

Higher highs, and higher lows in the market outline an uptrend in the market. When we get successive higher highs combined with higher lows, we can determine key areas in understanding price action. Each time the market reverses from a high point, that is an incredibly important piece of information. At that point, every person trading was in agreement that that specific price was too high. This may be temporary. What we are looking for is if that high is easily broken by a new higher high.

Lows in the market:

Similarly, lows in the market define areas where the market is considered to be too good of a deal. These lows define where buyers and sellers are in agreement that the market is undervalued. When we get a low in the market, we want to look for if it is easily broken by a successive low.

Support and Resistance Outlined with Price Action:

Each area of support and resistance, minor and major, can signal trades/stops. Therefore we can look at higher time frames to determine key areas of resistance and support. Combined with these, we can trade the lower time frames to find entries for our trades. There are often conflicting bits of information between higher time frames and lower time frames using this same method. All we must do is remember the golden rule, “the higher time frame is always dominant“.

Dominant Time Frame:

Highs and lows price action can be applied to any time frame, but a level of R&S on a hourly chart is more dominant than a different level of R&S on a 5 minute chart. Both of these levels can, at the same time, be valid, but we must always respect the higher time frame’s value. This is due to the volume, and type of traders on the higher time frames. We go into detail about these traders in a different video here.

Bruce Banks Trader And Trainer