How to day trade using price action: Day trading for beginners episode 15: Day Trade Wyckoff Springs

Welcome to Day Trade To Win.com

Today we’re going to continue where we left off in the last episode. I showed you how the markets are manipulated to break a support line in order to have you scared out of your position. How the market then immediately reverses and starts a new trend in the opposite direction – i.e. in the direction that you and many traders thought the market would go – but everyone got scared out out their positions when the market broke the support line. 

This is what Wyckoff traders would call a spring! The market is squeezed together like a spring, and when the tension is released the market shoots right up – just like a spring would do.

I have heard some pretty experienced price action day traders say that trading these springs is one of the best ways to trade the markets using price action only. And I definitely agree, and if you look at the chart I guess you can see why. After the market has broken through the support, it usually moves up explosively and the trader who bought down here makes a lot of money in no time.

Unfortunately, it is very difficult to trade these setups live, because it goes against everything you have learned about the markets and what’s supposed to happen when the markets break a support line – you will definitely think that the market will move down. So it also goes against your emotions, beliefs and rationale.

So my suggestion for how you can approach this instead is to let the spring and the subsequent market action play itself out – let the market break the low, let it reverse and start moving upwards. Don’t rush into things. Wait for the first pullback. That is when you should enter your position. 

If this pullback holds above the previous low, the spring  – then it will be a great time to enter your position. If the pullback is on lower volume and smaller candles than the up move then, just like we discussed previously, then that is a very good indication that the line of least resistance is UP – and you can go long!

So, let the market break the low, wait for it to move upwards, wait for the next pullback and enter your position.

You can also have the opposite situation for a short trade. Wait for the market to break the high, let it reverse and move down. Wait for the bear rally on lower volume and smaller candles and enter your trade. The bear rally should not reach as far down as the initial upthrust.

So that’s it. That a good price action day trading strategy. It is difficult to trade the spring or the upthrust, but if you wait for the first move and the pullback then it becomes much easier to trade this.

And hey! Just a few more days and the day trading mentorship program will start. If you’re serious about becoming a day trader, go to daytradetowin.com and sign up for the 8-week mentorship program where you’ll learn great day trading strategies and be coached by a pro trader. Get your free day trading simulator and live real-time data feed for practicing – at daytradetowin.com 

Until next time, good trading!

How to day trade using price action: Day trading for beginners episode 14: Fear, greed, hope – day trading emotions

Hey, welcome to Day Trade To Win!

Last week we spoke about day trading psychology or market psychology. When the markets make a new high, many traders want to jump on the bandwagon because they are afraid of missing out on a big stock move. And there are also other day trading emotions involved, like greed and hope. Any emotion that a day trader feels will most likely be detrimental to his or her trading. 

Day traders are greedy people, no doubt about that. And when the market makes new highs, day traders will be hoping that the market will continue upwards and they will make a lot of money day trading that move.

But if we dwell a little bit further into trading psychology and emotions in trading we can continue where we left off in the last episode when we discussed the day trading emotion of FEAR. There are two ways that the emotion of fear will affect your day trading. The first one, the fear of missing out on big profits, was discussed in the last episode. Another way that fear will affect your day trading is the fear of losing money. I think all of us have experienced this quite often.

This is something that the market makers and big players will use to their advantage. They will take advantage of you by instilling fear. Let me explain this with an example:

Let’s say that you and a bunch of other traders and investors own a stock that the big player, “Mr. Market”, wants to own. Mr. Market, by the way, is the term I like to use for the combined big players in the market; hedge funds, trading firms, mutual funds, etc.

So Mr. Market has already accumulated a very big holding of stock, and he is expecting the markets to move up – and he still wants to buy more shares. But there is not an endless supply available for him, and You and the rest of the traders who own the stock that Mr. Market wants to buy, you don’t want to sell. Because, you also expect, or hope, that the stock price will increase and that you will make a lot of money on it. 

But, as usual in trading, you can never be certain that the stock price is going to increase. 

So what Mr. Market, the composite big player in the market, will do is to manipulate the market in order to fake a down move or a crash, which will scare a lot of traders, like yourself, into selling.

The way this is done is as follows; the market is in a sideways channel – I actually already explained this in more detail in an earlier episode, but how the big players accumulate their holdings, is they decide a price level where the stock is cheap in their eyes, they start buying everything they can get their hands on at that price level. The market starts moving upwards because of all the demand, and the lack of available supply, that this buying is causing. 

By buying everything there is to be bought at that price level when the prices are getting too high, then Mr. Market starts selling a small part of all the shares or contracts he bought. This will cause the price to move back down to more affordable levels again – because there is not as much demand when Mr. Market is not accumulating, and there is actually supply coming into the market.

When there is no more available shares or contracts at that price level, at the levels of accumulation, and Mr. Market still wants to buy more before he is satisfied – Mr. Market would then do a kind of market manipulation – completely legal – he would start selling a considerable part of his holdings. And this is done to “shake out” some day traders, forcing them to sell. Some day traders would call this “stop hunting” as a lot of this selling is going to happen because of day traders’ stops getting hit.

While many other day traders will think that the prices are starting to look cheap, and want to buy more – a whole lot more traders that already own the stock will start getting scared – they fear that their opinion on the stock or commodity was actually wrong and that the market is going to crash instead.

It’s easy to see, all of this is easy to understand this if we look at a chart – the stock is in a trading range, a sideways consolidation. The big players accumulate their holdings buying on the up moves, selling part of their holding on the down moves – but on average they are accumulating as much as possible. Everybody expects the market to move up and break out of the trading range to the upside, but then the big players sell a big chunk of stock and the market actually breaks the support because of all the supply, caused by the artificial selling by the big players.

A lot of traders would have stop-loss orders placed below support, so they would sell as these levels get hit. And a lot of traders think the market is crashing so they would sell out of fear. Fear of losing money.

And what happens then when all these day traders are getting scared and sell their stocks? Well, Mr. Market buys everything that these scared traders are selling. And Mr. Market actually gets to buy all those shares at a discount, at lower prices than the original level where they started accumulating their holdings.

And then the market moves right back inside the trading range, and breaks through the resistance and continues upwards. Mr. Market cashes in, and you are left wondering what the heck just happened.

But it is very difficult to day trade without any emotions at all. The best option to reduce emotional trading is to use automated day trading signals, or use a completely automated trading strategy with trading algorithms. At daytradetowin.com we offer software that produces automatic trading signals, so if you need a day trading strategy make sure you check it out. If you’re serious about becoming a professional day trader we recommend that you get a day trading coach or mentor. In our day trading mentorship program we teach 10 different day trading strategies so there is something for everyone. The next mentorship class starts soon, so go to https://daytradetowin.com/day-trading-mentorship-coach and register now while there are seats left.

Thanks for watching, if you like this series of videos – please give us the thumbs up and subscribe to our Youtube channel and please share the videos in your social networks and channels.

Until next time, good trading!

How to day trade using price action: Day trading for beginners episode 13: New Highs – how to trade

Hey, welcome to daytradetowin.com

Today we’re going to take a look at an important thing in trading, and we’ll also touch the topic of day trading psychology. There will be episodes covering day trading psychology in detail later on, but I wanted to cover a topic that really emcompasses both trading psychology and price action. If you want to learn more about trading psychology make sure you subscribe to our channel as we will cover that in coming videos.

But today we’re going to take a look at “new highs”, and the market psychology or trading psychology that goes together with a new high in the market.

First of all “new highs”, or “new lows” for that matter, are always significant. Whenever the market makes a new high Everybody is talking about it. If you tune in to CNBC, Bloomberg or any tv channel covering the markets you will hear about it. If you read day trading blogs you will hear about it. If you participate in trading forums or discussion boards you will hear about it. 

The S&P 500 just made a new high, the NASDAQ or the Dow just made a new high. Apple or Facebook made a new high. Or Google made a new high….

The same applies when the market is in bearish mode and makes new lows, or some popular stock is crashing and makes a new low. You will hear about it.

And when we hear about these things, when everyone’s talking about it – for sure there will be a lot of interest in trading that, and a lot of trading going to happen at these levels.

So, what are new highs really. Sometimes, during very bullish periods the market makes new highs almost every single day – and although that is something that leads to a lot of interest and a lot of demand – hearing about the market making new highs every day, and does not seem to stop. It is going to the moon.  

But the most important new high is when the market has been in an uptrend, then pulled back and then breaks out of the previous high. That’s also the easiest time to be trading these situations.

Same thing in a down trend, the market rallies and then reverses and starts moving downward again breaking down through the previous low.

Now, all of this is usually more significant if you’re swing trading. Because swing traders are looking at the same time frame as the talking heads on TV and the general public. We have a lot of traders who both swing trade and day trade and I do recommend that because you get a whole new way to diversify and spread out your risk. But for day traders, any time period when there is a lot of interest in the market will bring more volatility, more liquidity and that’s good for day trading.

But you can and should be looking for New Highs in day trading as well, and new highs are usually found when the stock breaks out through resistance or support. The stronger support or resistance the more important will the New High or New Low be. 

We covered this in an earlier episode. So what you will see is the market breaking through, and volume picks up – more and more traders notice the break out – the new high – and together push the security upwards, through, and away from the resistance because of all the demand that enters the market. 

Everybody wants a piece of the action – that’s where the trading psychology comes into play. When you see a stock, currency or commodity make a new high – you see all the trading, all the volatility – then more and more traders get interested in trading that particular instrument. 

Traders don’t want to miss out. Traders fear missing out on a big move. That’s what happens, that’s how the market psychology works in this case. More and more traders will start trading emotionally, they feel they have to get in, they have to trade, although the market already made a big move. 

Then, once everybody who wants to buy have done so, there will be a pullback on lower volume. Why? Because there is not as much demand anymore. More and more traders or scalpers who bought at the top after the breakout, these guys will start selling because the market seems to head downwards and they’re not making any profit on their trades, and the reaction causes short sellers to enter the market. So less traders are buying and more traders are selling or selling short.

This is something we also covered before. This is a good time for you to enter your position: There was a break out and a big rally, then the market pulls back and again continues its move upwards. When that happens again, more and more traders will join in on the up move. If you buy when the market reacts and pulls back, then you will have no trouble getting in at a good price – you are not competing with a bunch of other traders for the best price.

We’ve had a lot of interest in our day trading mentorship program this month, so we have a new mentorship group starting soon. There are a few seats left, so go to DayTradeToWin.com to find the dates and reserve your seat. We have 10 different day trading strategies that we teach in the program. 

We also have individual training courses, strategies and software available for you so you can get a head start in day trading.

More videos are coming, so make sure you subscribe you our day trading YouTube channel and please share with your network. Until next time, good trading.

How to day trade using price action: Day trading for beginners episode 12: Candlestick patterns 3

Welcome to DayTradeToWin.com

Today I want to go through some more candlestick patterns. But one thing that I really want to point out, and I mentioned this earlier in a previous episode, is that you should look at candlestick patterns as “principles” instead of exact patterns, you need to look at the whole picture, the whole chart, instead of mechanically look for a candle or a few candles that look a certain way. 

You see if you could only look for specific patterns, like one of the reversal patterns we had a look at in the last episode, and trade when you found one of them  — if that was possible we could just program an algorithm and automate it, like the other software that we provide. In my opinion, these candlestick patterns can be powerful tools that will help you in your price action day trading, but you shouldn’t just mechanically trade them. You always need to consider the whole picture.

Today’s example will be such a pattern – one that can have unlimited variations. There is one “core” pattern that is usually taught in candlestick theory – it is called the Rising Three methods, or falling three methods. In itself, this pattern is not that good. I have programmed this and tested it – but it is just not that good to base your day trading on, and the reason for that is the pattern is not that common. You would find it very often in your charts. And that creates a lot of uncertainty in backtesting. Even if it produced good trades, I don’t recommend trading it mechanically. But I use ideas from this in my own trading. When I was an equity options trader for a trading firm I used the ideas from this all the time.

So what I recommend you to do is to simply understand what the pattern means. What it stands for.

So let’s break it down. This is the original Rising Three Method – I’ll show you how I use it in my own market analysis afterwards.

First, you have one big green candle. Right? You remember the big green candle from a few episodes ago. So the big green candle is a big, strong bullish move. Then you get three small red candles pulling back towards the same level where the Big Green Candle started – so the market is pulling back to the same level where the pattern started, but the candles should not move lower than the low of the first big green candle. And then finally after the three red candles, you get another big green candle. The idea in the candlestick theory is to trade when the market breaks the high of the first big green candle.

So that is the Rising three methods pattern. We also have the opposite on the short side: the falling three methods. A big red candle, three small green candles, and then another big red candle.

The way I use this:

First of all – I don’t really care if there are one big green candle or 10 candles on the initial up-move. It is irrelevant really because I always look at this as an idea, as a principle – what I look for is a strong up-move. Then at some point, after one candle or 5 candles or ten candles, you will get the pullback. Now I look at the candles, I look at how big they are, I look at how many they are. Essentially I am simply comparing how much effort was required to make the up-move, and then compare that with how much effort is required to make the same distance on the down move. And with effort, I mean basically counting the number of candles it took. If the market made 10 points over two candles on the up move, then took 10 candles to move down – that means the market does not have to work as hard moving upwards compared to moving downwards. The up move was easy, there is a lot of demand. The down move is harder because there is a lack of supply compared to the demand. 

The market might not even go down as far, and that’s a good thing. The lower it goes the weaker the market is, so if it reverses back up again near the top third of the big green candle the market is strong if it reverses at the bottom third of the big green candle the market is weak. Anywhere in between is what I would consider a normal pullback. You just use the 50% line, it doesn’t have to be exact to the decimal, but just eyeball the chart, determine where the half of the green candle is by eyeballing, doing it manually, just find the middle of the big green candle, if it reverses above or below that 50% line. The higher up the better.

And then when we get the up move after the pullback, I again compare that against the pullback. How much effort is required to travel that distance? Does it happen on fewer candles, then that’s great. If it happens on one or a few big green candles then that’s optimal.

If the candles in the pullback and the last big green candle have long shadows, then that’s an even better sign. It tells us that the market tried to move down lower, but it wasn’t able to, the price was forced back up and closed there. If the market can’t move down, then it is likely to move up instead.

Volume, big, small, big

OK, and one important thing will be to look at the volume. The volume should be higher on the up moves than the down moves. What does that tell us? Well, it tells us that there is more demand than supply, and that means that prices ought to move up. There are more and stronger buyers participating than sellers. Everybody wants to buy, nobody wants to sell. So the big green candles or the up moves happen on strong volume, then the pullback is on lower volume, the volume dries up. Then when the market starts moving up again, more and stronger market participants are joining in on the trading and volume picks up again. We want strong moves that show the market’s determination to move upwards, and small, slow, sluggish pullbacks just giving the market a breather and lets it regain its energy.

Alright, so a few words also on trading this:

If you only look at the Rising Three Methods pattern itself, only the five candles, if you are going to trade that, then you should only trade that in uptrends. The Falling Three Methods should only be traded in Downtrends. The market can be so erratic sometimes that you can see the Rising pattern in downtrends and the falling patter in uptrends – or during sideways channels. In those situations, don’t trade it.

The idea and the principle of the strong up move, weak down move and strong up move can be used in sideways channels as well. It tells us that the demand is bigger, so the odds favor a breakout to the upside. In uptrends, the principle tells us that the market is strong and that the uptrend is more likely to continue than to reverse.

Alright, that concludes today’s episode. Please go to Daytradetowin.com to download our free “get started day trading”, get our free day trading simulator with live real-time data, and check out our software products and courses. And last but not least – check out our 8-week day trading mentorship class. If you are looking for day trading coaching you have found the right place.

Until next time, good trading!

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How to day trade using price action: Day trading for beginners episode 11: Reversal patterns

In last week’s episode of how to day trade using price action, you gained an understanding about how the pricing of securities worked through my simplified and silly examples. We also had a look at the “Big Green Candle” and you learned what it really means when you see one of those big green candles. I believe it is important to for you understand the mechanics behind the candles in your chart. Usually the Big Green Candles are found in strong uptrends, and they signal a continuation of the trend. 

I didn’t go through the “Big Red Candles”, but I know you are pretty smart, so you probably already figured out that Big Red Candles are the opposite to Big Green Candles. In other words the Big Red Candles are big bearish candles found in a down trend. They can also be find right at levels of support, when big strong moves are required for a break out. Same thing with Big green candles – they are often found at levels of resistance, and the big green candle represents the strong demand that is needed to break through the resistance.

These are also continuation candles, meaning that they indicate a continuation of the trend. In an uptrend you want to see bullish candles, and in a bearish trend you want to see bearish candles. Makes sense, right?

There are also reversal candles, that signal an imminent reversal in the trend. Today I will go through a basic reversal candlestick pattern. This is simply called the “Reversal candle”. I will go through examples in an uptrend, and there are four main variations of this pattern. 

This pattern is formed over two candles, but that doesn’t mean that you are only going to look for these two candles. You’ll also need to take the candles before that into consideration. Always when you trade patterns, and price action in general, you cannot just isolate a few candles and look at only those candles. 

It’s just like when you’re reading a book – you cannot just read a word here and there, you need to read and understand the whole sequence of words in order to get anything meaningful out of it. 

So when you’re reading price action, you’ll need to consider the whole chart. Has the stock been in an uptrend or downtrend, is it moving sideways, is it erratic and chopping around, and so on. 

So the definition of a Reversal Candle is that the candle opens, makes a high, but closes below the open, and closes below the close of the previous candle. 

There are also variations of this reversal pattern;

The first variation is the “Outside Reversal Candle”. “Outside” means that the highest high of the candle is higher than the previous candle’s highest high.

Then we have the “Key reversal”, which means that the candle opens lower than the previous candle’s close, moves higher and then closes below the open, and also below the previous candle’s close. 

And then finally the “Outside Key Reversal” – the candle opens lower than the previous close, makes a new highest high, and then closes below the open and below the previous candle’s close.

The same principles apply in downtrends, but you’ll need to replace the highs and lows, with lows and highs, right? 

So an “outside key reversal” in a downtrend opens higher than the previous close, moves lower than the previous candle’s low, it closes above the open, and thereby also above the previous candle’s close.

Like I mentioned in another episode in this price action day trading series, the market always tests where it has been before – so the outside key reversal is a final test of that price level – of that previous high or low, just before the market starts heading in the opposite direction. 

It’s a good candlestick pattern.

Alright, and remember you cannot just look at the two candles of the pattern to be successful with this. 

If you have sideways, erratic, choppy price action it doesn’t make sense looking for the reversal patterns. The market needs to be in a trend, it needs to have “predictable” swings higher and higher, two three swings that you can clearly see.

Then as we approach a potential top of a swing, the price action starts to arch over, you can start looking for reversal patterns. Then you are likely to catch the top of the swing, and be able to successfully trade short. If you’re in a downtrend and get a reversal pattern at the bottom of a down swing, you trade long. 

We’ll cover more on this in the next video, so please subscribe to our Youtube channel, and please like this video by clicking the thumbs up! 🙂

And by the way, did you know we also offer day trading mentorship? The next 8-week mentorship program begins soon, so head over to daytradetowin.com to sign up now while there are seats available.

How to day trade using price action: Day trading for beginners episode 10: Candlesticks patterns

Welcome to DTTW – how to day trade using price action – in this week’s episode we are going to start looking at specific types of candles and series of candles that you can identify in your charts, and use them to improve your price action trading. 

If you use some software like the Day Trade To Win Atlas Line or TradeScalper to find your trades, you can definitely combine that with reading price action. Our day trading strategies are all based on price action, so it makes perfect sense combining those automatic trading signals with reading price action.

You can of course also use price action alone to find trades, for times when the software does not provide any trading signals and you want to be actively trading. 

BUT! Please always remember to refrain from overtrading. Just because you’re a day trader, it doesn’t mean you should be trading all the time. It is important to know when to stay out. So I recommend using price action not only to find trades, but also to filter out bad trades and knowing when to stay out. 

Now, before we go into details and start looking at specific candles, you’ll need to understand how the pricing of securities work; whether it’s stocks or shares you’re trading, or forex, crypto’s, currencies, futures, commodities – all trading is a lot like a public auction – people in the crowd try to bid over the others in order to get the item that they want. The highest price that anyone in the crowd is willing to pay for the item gets it. 

So if you are ready to pay more than everybody else – the item is yours! Congratulations! You just paid more than any other person in the whole world was willing to pay. You’re the one that’s left holding the bag. 

In economic theory – and by the way, I’m sorry for being such a nerd – I sometimes like to mix my silly examples with economic theory because I’m a nerd with a master’s degree in economics and business administration and during my time at the university and stanford I came across a bunch of stuff that actually makes sense in real-life and helps me in my trading, so I’m trying to pass on the good stuff to you.

Well, anyway, in economics – There’s something called the “Winner’s Curse” which describes the phenomenon where a Winner at an auction tends to overpay because of emotional reasons, or because of incomplete information. The winner either pays too much, or the item is not as valuable as he and everybody else had thought.

MUCH like trading – we all know how bad emotional trading can be – if you’re willing to pay more than anyone else for getting IN you’ll be screwed. If you buy right at the top – well… you’re screwed. 

And obviously with incomplete information you won’t last a day in the markets – so if you don’t really know what you’re doing – get a day trading mentor – our next Mentorship programme starts soon by the way.

Anyway, the stock exchange or the forex marketplace works slightly different than a regular auction, because prices can move up like we’re used to, but the price can also move down if nobody wants to pay any more than the current price. 

See, the brokers and market makers always want to fill your position – that’s how they get paid – they don’t care if the price is $10 or $100,because every time there is a trade they are cashing in. They just want you to trade as much as possible. When you’re a broker the price is always right.

So when there has been a lot of demand for a stock and it has increased in price, then at some point there will be no more demand, because the traders think the price is getting too high. Well, in order to make money – the market makers start offering the stock at a lower price. They don’t care if the price is going up or down – they don’t get their cut based on how much they are able to increase the price, they get their cut every time somebody buys, so they always want to find the optimal price where the trades are going to happen.

The first type of candle I want to go through is what I call the “Big Green Candle”. 

I have no idea if this type of candle or bar has any specific name. If you know of a real name for this, please drop a comment below – it would be interesting to learn.

Alright so the Big Green Candle is exactly what my suggests – it’s a big candle and prices moved up so it is green. Big Green Candle.

So, Let’s think about how this candle is formed.

OK, You know that the pricing of securities are much like a public auction – 

And  to give you a simplified explanation of what is actually happening behind the scenes — the market maker asks if anybody is willing to pay the current price. And if yes, then the market maker fills all the open orders at that price. Then when there are no more orders at that price, he tries increasing the price one increment and asks if anyone is willing to pay that price. And if there are traders willing to pay that price they will get filled. Then, because there is more demand for the security, the price is increasing all the time as long as there are buyers, as long as there is a lot of demand. 

So for the duration of the big green candle the price is going up, and the more demand there is the bigger the volume bar is getting. If there wasn’t demand for the security, then the prices would not increase, because the market maker would not be able to raise the price. 

Let’s consider a real life example, picture yourself at an auction. There is an item that you really want to buy, but you seem to be the only one who’s interested in this specific item. Now, if there is no demand for this item, if there is no other buyer than yourself, it doesn’t make any sense paying more for the item than the current price. It does not make ANY sense bidding over your previous bid, does it? If there are no other buyers, then you might as well try to pay an even lower price for the item – it’s not going to be sold anyway.

So when you see a big green candle, you know that there is a lot of demand. The bigger the volume compared to what is normal for the security the more demand. The bigger the candle the more demand. When you have a series of big green candles you know that the demand is not going away, but there is big demand over many candles. When you have a series of bullish candles, and the market is moving up – usually it is best to wait for a pullback before buying.

That’s it for today – please subscribe to our Youtube Channel, and please remember to share this series of Price Action trading videos in your social media. It’ll make you look great!

In our mentorship program, we will teach you more than 10 different day trading strategies that are even more powerful than this one. Our next 8-week day trading mentorship program begins soon, so make sure you sign up while there are still seats available.

Until next time – good trading!

How to day trade using price action: Day trading for beginners Ep. 9: Day trading strategy 1

Today I am going to show you an example of a day trading strategy that is super simple, and it’s based on ideas from the previous episodes in this series, so it’s 100% based on price action and volume.

We are going to present more day trading strategies in this series, so make sure you subscribe to our Youtube channel.

The first thing to do is to decide what you are going to trade. At daytradetowin.com we recommend our students to trade the Emini S&P500 – it’s very easy to get started trading the Emini S&P500, and we can provide you with a free day trading platform and free, live real-time data – go to daytradetowin.com to get it.

Anyways, the first thing to do is to open up a live chart of the Emini S&P 500, or whatever you want to trade: currencies, stocks, commodities, etc. I personally would apply this to a five-minute chart, because that is what I am most comfortable with – but if you’re a shorter-term scalper or longer-term trader feel free to use this strategy on whatever time frame you want to use.

Then when you have your chart open you will start looking for candles with huge volume. The volume needs to be really high, extremely high, which tells us that there is huge interest in that particular price level where the market is trading. There is huge supply and demand – people want to buy or sell at that specific price level.

The next thing you do is to check for any news. If the huge volume is based on some news event then you will need to determine what implications that could have. I wouldn’t trade if there was an announcement made, or some economic news that was scheduled to be released. Those sort of things can cause the market to react in erratic ways.

And also one more thing – and this is important. We don’t want to trade this in the morning when the session opens. For that we have the ATO2 instead. The session open usually has extremely high volume and great volatility – but if you want to trade the session open I definitely recommend the At The Open 2 that is available at daytradetowin.com

The next thing to do is to wait for that high-volume-candle to close. It does not matter if the candle is red, green or a doji, and it does not matter if the candle is big or small. If the following candle also has the same amount of volume then wait for that candle to close.

So now you have one or two candles on huge volume. What you would then do is to find the highest high and the lowest low of those candle, and draw a horizontal line from those points.

You will now have a range – in this range there was a lot of interest. A lot of traders bought and a lot of traders sold – so it is significant – it is an important price level. We don’t really care why it was important, why there was this huge volume – because we are technical traders.

Now you just wait until you get a candle that closes outside this range. If the following candles trade inside this range you will wait for a candle to break out of the range. You want that candle to close outside the range. That will be the direction that you want to trade in.

But you do not want to enter a position yet. Because now everybody is jumping on the bandwagon and it could be a false breakout. Instead what you would do is to wait for a pullback…

So you enter a limit order at this level – if the candle closed above then you would enter a limit order to buy at the highest high of the high-volume-candles – if it closed below then you enter a limit order to sell short at the lowest low of the high-volume-candle.

Then you just wait for the market to retrace back to these price levels. The market always wants to test where it has previously been, so it is very likely that you will get a retracement back to this level. Sometimes the market does not retrace all the way back to these levels, in those cases you would read the price actions and you could enter your position based on that analysis. But if there is a pullback to the optimal price level then you will get filled.

You’ll need to be as quick as possible with your limit order – because they are filled on a first come first served basis – so don’t wait until the last minute with entering the limit order.

Sometimes there will not be a pullback at all. You can also enter this trade once you have two consecutive candles closing above or below the range. Then you would just enter in the same direction as those candles. But, this is not something I would recommend for beginners, but if you’re and experienced trader you can try this.

Then – When you’re filled you will need to manage your trade. I suggest you take profit at 1 times the ATR. The ATR is a good tool that you can use in order to base your profit target on what you can realistically expect from the market at any given time.

You can also use the high or low of the previous swing depending on if your long or short.

You’ll also need to protect yourself with a stop loss order – so that you are stopped out if the market goes against you. The easiest stop loss would be based on the ATR, but you can also use other stop loss strategies. We’ll teach you great stop loss strategies further on in this series. We’ll continue this price action trading series, so please make sure you subscribe – and if you like day trading – please give us the thumbs up and like our videos.

Hope you like this super simple day trading strategy. In our mentorship program we will teach you more than 10 different day trading strategies that are even more powerful than this one. Our next 8-week day trading mentorship program begins soon, so make sure you sign up while there are still seats available.

How to Day Trade Using Price Action: Volume analysis continued – Ep. 8

Welcome to Daytradetowin.com

Today we’re going to continue where we left off last time. We’re going to continue with the Volume analysis and combine it with trends and trendlines. Supply and demand.

Volume speaks volumes about the market – sorry for the silly play with words – but that’s the way it is. It speaks volumes about the relationship between supply and demand, and about the quality and strength of trends and movement in the market.

We can use this information to our advantage and gain an edge over other traders who don’t know how to read volume.

In the last episode we had a look at how we want the volume to increase and be high in the up moves of an uptrend, and diminish and be lower in the pullbacks. The up-legs are strong, the pullbacks are weaker. That tells us that the uptrend is strong and healthy.

Trends that do not have enough volume will not last for long, because that means there is not enough supply or demand to keep trending. Instead it is likely that we get a period of consolidation and sideways movement, or a new trend in the opposite direction.

When we draw trendlines and trend channels we can use the volume to get a better understanding about how strong that trend line is. If the market reverses at the trendline and the volume picks up on the move away from the trend line, then we can have confidence in that trend line. And once the trend line breaks, we want that to happen on a big candle with big volume – the market should show determination. And after the break of the trendline we want the volume to diminish on the test of the trend line. The market is going to test that previous support or resistance. The market is going to test if it is able to move back inside the trend channel, or back above or below the trend line. So this pullback or rally back towards the trend line after the break out should happen on lower volume. Again, this tells us that there is no willingness to move back where it came from, there is not enough supply or demand required to do so.

So let’s now have a look at another way to analyze volume.

How can we tell if a trend is going to end? We’re never going to reach 100% certainty that a trend will end at some specific price – if we would have that ability we would all sit on our own private islands in the caribbean right now — but we do have a method to analyze the charts that will give us reasonably high – i would even say high – confidence in knowing that a trend is at its end, at least for the time being.

So let’s consider an up trend. The same will be true with downtrends, but let’s start with the uptrend as it is easier to grasp what I am about to explain.

So we know we want the up-legs to be stronger and the down-legs to be weaker in an uptrend, right? But how do we know that the upleg is going to end, or if the uptrend is going to end?

Let me give you an analogy – I just love analogies, the sillier the better. Silly is simple, simple is easy.

So we have Mr. Market here running up the side of a mountain.

The hill sometime becomes steeper and steeper, and sometimes there’s an area that is flat or part that is easier, even going downhill before going up again. So the side of the mountain is just like an uptrend, right? In the market you’ll have up-legs, down-legs and periods of consolidation.

Now if you have ever walked up the side of a big mountain you’ll know just how exhausting it is. You need the be in pretty good shape to do it. I was visiting the Swiss Alps some years ago. At that time I was is pretty good shape – I was jogging regularly and going to the gym, but I was still getting pretty darn exhausted as we went hiking in the mountains, the Alps.

So as mr market starts walking up the mountain side the path gets steeper and steeper and steeper until finally he reaches the mountain ridge. The volume bars shows the effort he is making. The volume bars get bigger and bigger. Mr. Market is getting more and more exhausted. Right at the top he makes the final push, one last big effort to get up to that ridge.  

That’s exactly what happens in your chart as well. The bars move higher and higher and the volume stays high, or picks up and increases. At some point there will be one last push, one big candle on very, very high volume. This is sometimes referred to as a Buying climax. This buying climax exhausts the market completely, because it happens on a big candle, or a few big candles, and very high volume.

What happens during the buying climax is that all traders notice that the market is moving up. Everybody who watches the chart will notice the big move that the market is making. It’s moving up fast, and they all want a piece of the action. They don’t want to miss out on the big move that the market is making, so everyone’s rushing in and buying. The market makers are able to raise the price, there is a lot of demand, so the candle is getting bigger and bigger, and this causes even more traders to join in on the buying. So it’s a kind of a self-fulfilling prophecy.

This means the volume is getting bigger and bigger as well, because more and more traders are buying. The more buyers and sellers that participate at any given time, the more contracts or shares that change hands, the bigger the volume will get.

Then when all traders who wanted in, when they have bought everything they wanted to buy — then there is no more demand left. Nobody wants to buy anymore.

And what happens when there is no more demand? Well, the prices will stall and consolidate. Or if there is supply coming in – sellers entering the market – the prices will fall. There will be a pullback or a sideways consolidation.

The buyers who bought close to the top, they will sell because they aren’t seeing any profits on their positions. It doesn’t make sense holding on to a trade that does not produce profits. And the traders who bought at lower prices will sell to secure their profits. And of course the traders who bought right at the top will start to have losing positions and their stops are starting to get hit.

So all of this is building upon what we have learned in a previous episode — when the demand overcomes supply – the prices will rise. And when supply overcomes demand, the prices will fall.

We’ll continue on this topic in the next episode, so make sure you subscribe, and if you have any questions feel free to use the comments here below. Until next time, bye bye.

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How to Day Trade Using Price Action: Volume analysis – Ep. 7

Today, let’s talk about volume. I have mentioned volume and the importance of analyzing volume a few times so far in this series, so today I want to focus on volume.

So first of all, what is Volume ? Well, volume is the number of shares or number of contracts that are traded during a time period like a candle. In forex you don’t have volume, you don’t have the information about how much was traded at any given time, but most other tradable instrument will have the volume, like stocks, futures or commodities. In forex you have tick volume, showing you how many ticks took place during that time – it is different.

Anyway, if you think about stocks for example. Every time somebody buys and somebody sells any number of shares, the number of shares are added up. So in stock trading you have deals taking place all the time, somebody buys 1 share of apple, another one buys 1000 shares of Tesla, Warren Buffet buys Coca-Cola for a billion dollars! All those shares are added together and what you get at the end of the day – that’s the volume for that day. The number of shares that changed hands.

Of course you can, and as a day trader you should, also split the daily volume into hourly volume – or volume for 1 minute, or 5 minutes or 15 minutes, so volume is very useful for day traders as well.

When you look at a chart that displays volume, you will usually see the volume at the bottom of the chart, like bars sticking up. It is either called bar graph or a histogram. I have no idea which, but it’s one or the other. During my time at the university, some of the classes were more boring than others. Statistics in particular was something that I slept through most of the time, so I got bar graphs and histograms mixed up and the professor probably thought I was pretty stupid. So guys do yourselves a favor and pay attention to what your statistician tells you.

OK enough of the side track — the volume is displayed as a bar graph. In layman’s terms that means these bars sticking up from the bottom of the chart.

Together with the candles the volume will give you a lot of information. By analyzing trends and changes in the character of the volume, together with analyzing the movements in price you can get a better understanding about the relationship between supply and demand.

As you learned in a previous episode – the one with the silly cat – it is the relationship between supply and demand that determine if the prices are going up or if the prices are going down.

All good economists will tell you that:

If demand overcomes supply, then prices will increase.

and

If supply overcomes demand, then prices will decrease.

If there is huge demand for something, then the seller can increase the price and people will still want to buy. Or there can be limited demand, but if there is not a lot of supply the prices will still be high. So for example scarcity can lead to high prices – when I was looking to buy a vintage german sports car. There are not a lot of those lying around, so you cannot just go to any used car salesman and ask for a classic Porsche. Even if you found one, it might not be in that good condition. So at any given time there are not that many vintage Porsches in top condition. So there is limited supply – there is also limited demand – but prices are still high. There are not that many buyers either, so the prices are not extreme, but they’re still elevated.

So each volume bar at the bottom corresponds to a candle in the candlestick chart. When you have many candles in a chart, you also have many volume bars.

To explain the simplest way to analyse the volume, I sometimes use the car fuel analogy. You see you can consider the volume bars to show you how much fuel that the car consumes, and the price itself is the vehicle that is moving. You would expect the fuel consumption to increase when the car goes fast, and when the car slows down you would expect the fuel consumption to decrease. When you have big candles, up or down, you would expect big volume. When you have small narrow candles, the volume should be less.

There are two main ways you can gauge the volume on up waves. Either the volume increases on the upwaves, or it decreases. If the volume increases on the up move, then you can be fairly sure that there is good demand. When you have a series of up moves or up waves, if the volume increases on the upmoves, compared to the pullbacks, then you can be fairly sure that the series of upmoves will continue. The pullback will have lower volume in a healthy up trend, there is not as much selling as there is buying, so when buyers enter the market on the up moves – the volume should increase if you have a healthy up trend..

But if the volume diminishes on the upmove, there is no more demand. The market is running out of steam, and could well turn into a down trend soon.

Sometimes there is a period of Equilibrium before the market moves from a up trend to a down trend. During that period of equilibrium the market is in a horizontal channel. If the volume is picking up on the downmoves and decreases on the upmmoves, then chances are the market will start a new downtrend soon.

Same thing in a downtrend when you have price waves moving lower and lower. If the volume picks up on the down moves, and decreases on the rallies, then it is likely that the down trend will continue. If the volume starts to dry up on the down moves, then after a period of equilibrium, the market will form an up trend

That was the very basics of volume analysis – a bite size. In the next few videos in this series we’ll delve further into volume analysis, and then also start combining the volume with the analysis of the candles and get a good understanding about how you can use this information in your price action trading.

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