The 3 Real Ingredients of a Profitable Strategy — Transcript

Full transcript

1. 0:00Welcome in everybody. It's great to have
2. 0:01you with us. I want to take you inside
3. 0:04our tape reading room this week because
4. 0:06we put one trade on the screen that
5. 0:08teaches the most misunderstood lesson in
6. 0:12scalping.
7. 0:13Now, there's a phrase you'll hear on
8. 0:15every trading desk, "Fight for price."
9. 0:17It sounds like discipline, right? It
10. 0:19sounds like what the professionals do.
11. 0:22But, here's what actually happens. A
12. 0:24developing trader hears, "Fight for
13. 0:26price." and starts buying every red
14. 0:29candle. They're chasing a better price
15. 0:31on a trade that they haven't learned to
16. 0:33read yet. And in our room, we say it
17. 0:37plainly, "A pullback can offer you a
18. 0:39better price and it can still be a worse
19. 0:42entry if you can't yet see who controls
20. 0:47the stock." So, today we're going to
21. 0:49slow one real trade down, INTC, on a
22. 0:53morning it gapped down into a key
23. 0:54support area, and I'm going to show you
24. 0:56the exact moment the buyers took
25. 0:58control. We're going to talk about what
26. 1:00it cost to wait for that moment and then
27. 1:03what it paid.
28. 1:04The first question, the only question
29. 1:06that matters at the start, can you tell
30. 1:09when buyers are actually winning? Now,
31. 1:12let me show you.
32. 1:14All right, let's be exact because the
33. 1:16math here is not what most traders think
34. 1:19it is.
35. 1:20Intel gaps down into a key support level
36. 1:23on the daily chart and it starts to
37. 1:25maybe show that it's getting rebid,
38. 1:27right? The tape study starts near the
39. 1:29lows around 9:44 in the morning.
40. 1:32This is a key opportunity zone, 89.50.
41. 1:36It's where the view up and the 9 EMA are
42. 1:37pressing. Now, watch the two ways that
43. 1:40you can play it. So, entry A is the
44. 1:43anticipation entry. You can buy it early
45. 1:46at 89.70
46. 1:47because it feels like it's turning. You
47. 1:49start to see something. You think that
48. 1:51you can get a turn out of this and your
49. 1:53stop has to go down below 88.70. That
50. 1:56gives you a full point of risk.
51. 2:00Now, that is fighting for price, but
52. 2:02you're doing it in a weird way because
53. 2:04nothing has confirmed yet.
54. 2:07And here's what that entry really costs
55. 2:10in our own words from our trading
56. 2:12review. And I've seen it a thousand
57. 2:14times. You buy there because it's
58. 2:16through the level, right? And then it
59. 2:18drops out 30 cents on you. 30 cents is a
60. 2:21quarter of your entire risk gone in 1
61. 2:24second before the trade even started.
62. 2:27Or
63. 2:28you can use entry B, the confirmation
64. 2:31entry.
65. 2:32You can wait.
66. 2:33The buyers step in.
67. 2:35You see three green bars that take back
68. 2:38that big red bar.
69. 2:42That one bar gets taken back by three
70. 2:45green bars, and you can buy with that
71. 2:47confirmation. 8976
72. 2:508979, somewhere in there. Essentially
73. 2:53the same price as entry A, but now your
74. 2:57stop's defined by the structure that the
75. 3:00buyers just built.
76. 3:02Well, they started buying it back at
77. 3:04that 8920, the low of that big red bar.
78. 3:08So, in this case, you're risking roughly
79. 3:1050 cents instead of a point. It's the
80. 3:13same stock. It's the same morning. It's
81. 3:16the same entry price even, give or take
82. 3:18a few cents.
83. 3:19But it's half the risk because you let
84. 3:22the tape answer first. Now, this is the
85. 3:26mechanism that most traders miss.
86. 3:28Fighting for price
87. 3:30done the way we teach it on the desk,
88. 3:32buying only into red candles, selling
89. 3:35only on green candles, it's worth about
90. 3:385 to 10% of extra edge on a trade.
91. 3:415 to 10%.
92. 3:43That's real.
93. 3:44But it's actually a second order.
94. 3:47Control recognition is first order.
95. 3:50And the desk rule is absolute. The fight
96. 3:52for price exercise comes after you have
97. 3:56a playbook, after you have an edge in
98. 3:59that specific trade. If you do it before
99. 4:01that
100. 4:03and you're not fighting for price,
101. 4:04you're buying red candles and hoping
102. 4:07they turn into green candles. Now,
103. 4:09those are not my words for effect.
104. 4:12That's actually how accounts get blown
105. 4:15up.
106. 4:16That concept of fighting for price is so
107. 4:19important because the prerequisite list
108. 4:22for it is a short and a non-negotiable
109. 4:25list.
110. 4:26A repeatable setup, a clear direction, a
111. 4:29defined zone, and a price where the idea
112. 4:32is wrong.
113. 4:34Without those four, there's no entry to
114. 4:37improve. Now, let's go into the tape
115. 4:40because this is where it comes alive,
116. 4:42and I want to walk you through the same
117. 4:44trade twice.
118. 4:47First, look at the anticipation
119. 4:50moment, right? We saw that selling off
120. 4:53the open, and then Intel's pressing up
121. 4:55to that 8950. The buyers are definitely
122. 4:58there. You can see them trying, but
123. 5:01watch the bid here.
124. 5:03It gives,
125. 5:05and it gives again.
126. 5:07The buyers haven't won yet. The sellers
127. 5:10are trying to push it down through the
128. 5:12low. They try once, twice,
129. 5:16four times, and it holds.
130. 5:18But holding is not winning. That does
131. 5:22not mean the buyers are in control
132. 5:25because the sellers haven't been able to
133. 5:26take it lower. It's showing signs, and
134. 5:29if you buy here, you're buying a hope.
135. 5:32The tape hasn't answered the important
136. 5:35question yet.
137. 5:36Now, the second look.
138. 5:39This is just minutes later. It's the
139. 5:41same stock, just minutes later. Watch
140. 5:43right here. The buyers step in with size
141. 5:46on the bid. One big red bar gets taken
142. 5:50back by three green bars, and that
143. 5:54pattern matters. This is a really common
144. 5:58entry pattern
145. 6:01when you're looking for a trade. And
146. 6:03just understand it. Just learn it.
147. 6:04Conceptually, we're going to draw it
148. 6:05out. So, you have price action moving
149. 6:08higher, and maybe there's some wicks on
150. 6:10either side, or maybe it's just starting
151. 6:12to consolidate.
152. 6:14Maybe it's just holding up, and then all
153. 6:16of a sudden you have one big red bar.
154. 6:21That big red bar can be a warning sign,
155. 6:25but it can also be an opportunity if
156. 6:27it's occurring in the right context.
157. 6:30If you've entered all the way back here,
158. 6:32you're looking at a spot where you're
159. 6:34very concerned about your position.
160. 6:36But if you've been waiting like we've
161. 6:37been talking about,
162. 6:40you can see what happens. And let's say
163. 6:42the next three green bars look something
164. 6:47like this.
165. 6:54What is that telling us about what
166. 6:56happened on this big red bar?
167. 7:00First of all, we cleared the highs of
168. 7:03where those sellers really stepped in.
169. 7:04We never really went lower below the
170. 7:07lows of where those sellers started to
171. 7:10take control. And we're starting to see
172. 7:12the buying pattern of those large
173. 7:16institutional players.
174. 7:19You can flip this upside down, and
175. 7:21you'll see the exact same thing on the
176. 7:23other side. And many times, it's a
177. 7:25predictor
178. 7:27of what's happening. And all you have to
179. 7:29do is wait to buy with the buyers,
180. 7:33or if you flip this upside down, sell
181. 7:35with the sellers,
182. 7:37instead of fighting for price and
183. 7:39guessing.
184. 7:41Cuz what really happened is somebody
185. 7:43blew out their position on that red bar.
186. 7:46And the buyers were there to absorb all
187. 7:48of it.
188. 7:49That's the buyers taking control in
189. 7:53writing on the chart and on the tape.
190. 7:57And notice what the question becomes
191. 7:58now. It's the two questions we ask on
192. 8:01every fashionably late trade. Where are
193. 8:04the buyers winning and is the buying
194. 8:07sustained? Here the answer to both is
195. 8:10yes. They're methodical. They're not
196. 8:12chasing.
197. 8:13That's what a real buy program looks
198. 8:16like.
199. 8:17And the trade paid for the patience. The
200. 8:20stock balances above 9125. You're up
201. 8:23roughly five times your risk at that
202. 8:26point.
203. 8:28The stop would be trailed up behind the
204. 8:30structure. 9110,
205. 8:329150,
206. 8:349220.
207. 8:36And in this instance, because of the
208. 8:38type of buying that we saw, you're going
209. 8:40to make them take it out of your hands.
210. 8:42Now, the initial target for this trade
211. 8:44was 92.
212. 8:45But by trailing your stop up, making
213. 8:48them take it out of your hands, just
214. 8:50staying with the buyers the entire time,
215. 8:52because they were telling you they were
216. 8:54buying,
217. 8:55you get a whole extra dollar on your
218. 8:57shares, simply because the confirmed
219. 9:00entry
220. 9:02let the trade breathe.
221. 9:04We fought for price by buying with the
222. 9:07buyers. We didn't fight for price by
223. 9:09buying a red candle.
224. 9:12Now, let's flip it to the short side
225. 9:14from the very next day's session.
226. 9:18This is a late morning range break and
227. 9:20here's the line I want you to write
228. 9:22down.
229. 9:23A stock touching the bottom of its range
230. 9:26is not
231. 9:27the entry signal.
232. 9:29Now, anybody can see a big seller. What
233. 9:32confirmed this break was the pattern of
234. 9:34control. It was that 1-cent spread. It
235. 9:37was the seller stepping the offer down
236. 9:41and down and just chewing through the
237. 9:43bids. And the quick recoveries, the
238. 9:46little bounces that used to come
239. 9:48instantly, started to die.
240. 9:51When the recoveries die, the sellers own
241. 9:54it. That break ran its measured moves,
242. 9:573621st.
243. 9:59And the low printed down near 3528.
244. 10:03This is the same scale in the opposite
245. 10:06direction.
246. 10:08What we're saying is you don't have to
247. 10:11fight for price, and you shouldn't fight
248. 10:13for price anticipating the break.
249. 10:17You should only fight for price once you
250. 10:20let the tape prove who controls it.
251. 10:24So, here's how you build this. In our
252. 10:26desk, we literally flip this exercise
253. 10:29depending on where you are in your
254. 10:30trading journey.
255. 10:32If you're learning a trade, your rule is
256. 10:35the opposite of fighting for price
257. 10:37initially. You only buy when you see the
258. 10:40buyers. You're going to buy on a green
259. 10:42candle. You're going to buy with the
260. 10:44buyers. And you're only going to sell
261. 10:46when you see the sellers.
262. 10:49You're actually not leaving money on the
263. 10:51table. You're buying information with
264. 10:54those few extra cents. And the
265. 10:55information is what a developing trader
266. 10:58needs most. Then,
267. 11:00only when the trade is yours, when you
268. 11:03have an edge in it, you actually earn
269. 11:05the right to flip this exercise. You can
270. 11:09buy the red candles and sell the green
271. 11:12ones. And you can start to collect that
272. 11:14extra 5 to 10% per trade.
273. 11:17There's a line we use in the room, and I
274. 11:19want you to steal it.
275. 11:21You don't practice until you get it
276. 11:23right. You practice until you can't get
277. 11:26it wrong.
278. 11:28So, Steve Nash used to shoot from the
279. 11:30exact same spot on the floor through
280. 11:32four straight pickup games.
281. 11:35People were playing and he'd be over in
282. 11:37the corner.
283. 11:38Same spot. Over and over shooting while
284. 11:42everybody else is running around
285. 11:43playing, right? That's the mindset you
286. 11:45have to have here. One setup. Confirmed
287. 11:48entries scored honestly. And here's your
288. 11:51score scoring system.
289. 11:53You grade the read and then the entry
290. 11:56separately.
291. 11:58Did you correctly identify when control
292. 12:01changed in the trade? That's the read,
293. 12:04right? Given the read, was your price
294. 12:07good?
295. 12:08That's your entry.
296. 12:10If you grade them together, you'll learn
297. 12:13nothing from either.
298. 12:15But if you learn to recognize the
299. 12:17control flipping before you try and
300. 12:20anticipate it, a better price is useful
301. 12:23only when you still have the setup and a
302. 12:25clear point where the idea is wrong.
303. 12:29Stage one starts with your next session.
304. 12:33If you want, go ahead and subscribe for
305. 12:35more tape reading and scalping drills,
306. 12:37and I'll see you in the next one.