Learn Day Trading Strategies That Work in Today’s Markets Part 1, 2 & 3

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2018

Learn Day Trading Strategies That Work, Part 1

Learn Day Trading
Learn Day Trading Strategies that Work

 

 

When people are trying to learn day trading, they often try a lot of different strategies, techniques, indicators, etc., and most of it doesn’t seem to work, so traders regularly come to me asking, “How can I learn strategies that work?”

It’s an interesting way to phrase the question, and one must ask what is meant by the word “work.” Most of the time I believe traders mean “make money” when they use that term.

The video below will get you started on answering that question.

You can email me at barry@topdogtrading.com and I’ll be happy to show you how to get my Free Cycle Indicator to help you with your day trading strategies.

Enjoy the video and please leave your comments below.

PLEASE “PAY IT FORWARD” BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons at the very bottom of this post.

VIDEO TEXT:

Hey thanks for coming watching this video on how to learn day trading. This is Doctor Barry Burns with Top Dog Trading.

Today we’re going to talk about how to learn day trading. This will be a multi part video, either 2 or 3 parts. We’ll see how it goes. I don’t want to rush through. I like to keep these videos short and to the point so we’ll need at least 2 videos, perhaps 3. So here we go.

This is how I day trade. And it’s actually not too complicated. It’s actually quite simple. Not -saying it’s- easy. Trading is not easy but what I do is very simple.

When I went to Chicago to learn day trading and studied with some floor traders there at the Chicago Mercantile Exchange, I actually was doing pretty well trading, but my system was very complicated and I was actually proud of that. And then I went there I got humbled because those guys were making more money than I was, and what they were doing was more simple than what I was doing.

So I came back and I simplified my trading methodology and it’s been better ever since. So you don’t have to be all that complicated. Now what I do is look at 5 variables. 5 things. That’s it.

Einstein once said, make everything as simple as possible, but no simpler. And I think that applies to trading. I don’t think he was a day trader. So I’m pretty sure he wasn’t talking about how to learn day trading, but I think it still applies to day trading, in fact it very much applies to learning day trading.

You want to keep everything as simple as possible. Why? So that you can keep your mind clear. Your signals are black and white. Mine is very objective. Very rule based. But he also said no simpler, what he meant by that was or at least as it applies to trading is, you need a certain number of variables. Uncorrelated variables to establish a probability scenario. And that’s how we put the odds on our side now.

Not all of our trades are winners obviously. There are no certainties in the market but we can put the odds on our side with this successful trading method.

LEARN DAY TRADING THE “5-ENERGY METHOD”

So here is how I do it.

So the first energy that I look for is the trend. Trend simply refers to the direction of the market. Webster’s dictionary defines trend as the extended general direction of something.

A lot of traders use short term indicators, moving averages or price patterns to measure trend. And what they don’t realize is-they aren’t measuring trend because it violates the actual definition of the word, which is to extend in a general direction.

Now it’s not only important to have a long term indicator or-pattern to identify trend because it’s congruent with the meaning of the word. It’s also important financially so that we have a good reward to risk ratio. We want our winners to be bigger than our losers. And therefore -e want to be trading in a direction that’s going to continue for a while.

THE TREND INDICATOR

So I use something really really complicated. It’s called the 50 period simple moving average. Okay. So it’s not complicated. It’s the simplest thing in the world. It’s one of the most commonly used moving averages and it does do that. It measures the general direction of the market. It’s a lagging indicator, and you know lot of people say, well I don’t want any lagging indicators, why would I want that? I want all leading indicators. And I understand that.

That’s what I used to say to one of my mentors back in the day. He told me we always need a lagging indicator in chart. And I thought he was out of his mind. It took me a year, after he told me that to finally figure out what he meant. And it’s not the topic for today but maybe we’ll do that in another video.

So anyway, 50 period simple moving average. One of the most commonly used moving averages, and you know meets the definition of the word. Now could I trade this by itself? Absolutely not.

INDICATORS DON’T MAKE YOU MONEY

Let’s be clear. Indicators are just that. They indicate. That’s why we call them indicators. They don’t tell and they definitely don’t make us money. Otherwise we’d call them money makers. So they indicate, but we use them as tools to give us an objective measurement of something, in this case trend.

So alright, so trend is up. We had a big gap here. It’s kind of a gap and go situation. So we’re looking to go to the upside.

Now trading the direction of the market is not enough. Again that’s lagging. So we can’t rely on that to make money. But it’s one piece of evidence as we put our puzzle together.

MY MOMENTUM INDICATOR

Now here is my momentum indicator. Alright. And you can use all kinds of things for this, RSI, the indicator called momentum. There are a lot of different options for you.

But look what’s happening here. So momentum is going down. Momentum is going down overtime, while price is going up. And this is a problem. Actually most of these momentum indicators don’t really measure momentum literally but they are literally measuring is acceleration.

But the point is that when you learn day trading and have have a trend going up, price direction going up but deceleration, then that’s probably not something that you want to trade. In other which you don’t really want to trade with the trend.

Now this momentum tends to be a potential leading indicator. Nothing leads the market all the time. You need to learn how to read it. But it’s definitely a warning sign. So for example, we make another higher high and price here, as we are making a lower high on momentum.

And again that because quite often, not always, quite often strength will come out of the market before it actually reverses. While its still making higher highs. So in order to make this a true momentum indicator now its measuring acceleration, so we have to add weight to it.

ANOTHER FACTOR IN MOMENTUM

Momentum includes weight and I translate that as volume. So here is volume, and so we see we get volume. Kind of volume triangles. So as long as you get this, okay. That’s pretty cool.

And then when we look at this move here, yup. We still got it going on a little bit. And then we don’t get those spikes anymore. So, and if you notice what’s happening to our spikes, actually let me take those off of there. And let me just get a straight line instead of an arrow.

So here is our spike. And -then after that, see after this high, what happens, doesn’t go back up and reach those spikes anymore. Right and so the momentum is no longer there. That’s the point. So that’s a great indication that, and again it’s a bit of leading indicator in the sense that we have a lower high on volume, while we have a higher high on price.

And what that would do if I was in this trade, this is actually one of my trade setups. That would tell me, oh ok, you know what, I think I will just get out there, I’ll just- take on my profits right now. Because there is no more momentum.

WEAK TRENDS AND STRONG TRENDS

This trend which was strong, here is now turning into a weak trend because the volume is not supporting it. And if it’s a weak trend, even though we have made a higher high, you can’t just depend on a higher high.

Now its higher high on weakness. And therefore I’m going to lock in my profits, take my money and wait for the next opportunity. So those are the first of the two energies, there’s five energies that I look for in every chart. Those are the first two.

Trend. Simply the direction of the market is moving in, and momentum which you can understand as the strength behind the market, which includes both acceleration and volume. So in the next video, we’ll go into that little bit more. Look for part 2 of this series on how to learn day trading.

I’m giving away one of my favorite trade strategies. Absolutely free. It’s called the Rubber Brand Trade. And it has an extremely high win loss ratio. It’s a very simple strategy. You can learn it in about 26 short minutes. Just fill out the yellow form at the top of the side bar on the right. Once you do that, I’ll personally send you an email with first video.

Pay It Forward My Friend

PLEASE “PAY IT FORWARD” BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons below.

Leave a comment below telling me what other stock market trading strategies you’d like me to teach in the future.

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Learn Day Trading Strategies That Work in Today’s Markets, Part 2

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VIDEO TEXT:

Alright, now we are going to move on to Learn day trading strategies that work in today’s market part 2.

In part 1, we talked about 2 of the 5 energies that I look for in day trading. The first energy is trend, which is the direction of the market and then energy number 2 is momentum, the strength of that trend. so right here on this particular chart just as a review.

THE TREND INDICATOR FOR DAY TRADING

We use the 50 period moving average for trend which is just direction and we may or may not trade in that direction depending on whether we have momentum behind that trend. And here is our momentum indicator down here and that will determine whether the trend has strength. And only if it has strength do we want to take the trade.

In this case it does, however here as we put in this final high and notice that this strength would roll over from here, is weakening. And therefore that case, that will be a final high and great place to exit the market. But before that, as far as getting into the trade, yeah we got strength.

Now one last thing I wanted to mention about trend before we move on to the other two energies today, which is Cycles and Support Resistance. And that is this, there is a saying that you probably have heard. Very common saying when people learn day trading, that the trend is your friend till the end. And the reason for that saying is to remind us that it’s a higher probability to enter trends early in a new trend. And a lower probability trade to enter after that trend has already been developed for a while.

LEARN DAY TRADING: THE TREND IS YOUR FRIEND, UNTIL …

You want to get early and not late. And that’s a general rule in trading anyway. The pros always get in early, the retailers always get in too late to the party.

What we do to help us to know how early or late we are in a trend is we count waves. I’m not talking about Elliot waves. But I’ve a very objective way of counting waves that does not limit the trend to only 5 waves and I never recount the waves. They are always very objective, in fact I can program them in as I’ve done here.

YOU CAN AUTOMATE IT

I have have an automated little script that counts the waves for me. And we don’t have to recount them, they are never recounted, so it’s very objective. So the 1, 2, 3, 4, 5.

Now the average trend, even though based on the way I count waves which we don’t have time to go into in this video. Maybe we’ll do that in another video. But it’s basically higher highs and higher lows, that’s essentially what I am looking for, and there’s a few extra rules regarding candle sticks but it’s pretty much that simple.

The key is that, yes it can go more than 5 waves but the average trend is still based on this approach is 5 waves. So 5 waves is the sweet spot to exit your trade, because even though trend can go longer than that, it’s less likely to continue be on 5. That’s the average, that’s the sweet spot, that’s where I’ll get out of most of my trend trades.

HOW TO APPLY THE RULE OF GETTING IN EARLY

Alright so what we want to do really is enter on wave 2. That’s the 1st retrace in a new trend based on the 50 MA angling up, by the way, 50 MA is the green moving average here. Once it turns green, we know its angling up, that’s why here we get our first cycle low, after the 50 MA angles up. That’s wave 2. That’s our first retrace in the trend. That’s the earliest, you can take a trend trade.

These are great trades, especially with momentum. See here momentum is above the line. Here is the zero line, and momentum is this colored line. And again it’s turned from red to green and it’s above zero meaning that its bullish momentum and we’ve got volume going up. So that’s all fantastic. Direction’s up, volume’s up, we are early in a new trend. fantastic. That’s exactly what we’re looking for and then as I said, to get out wave 5.

DAY TRADING SUPPORT AND RESISTANCE

Now this is the screen capture that I used for the last video, for part 1 and people commented that I have too many lines on my chart, so look at all these lines in here. It’s very confusing right. Actually to see all those lines cluster together like that is very helpful. It’s telling you something, its information you want to know. And the information is essentially that.

There are a lot of support/resistance lines. That will be seen by various types of people who use different support resistance levels and that means it can be hard for the market to get through. There’ll be so many people who won’t want to buy into those levels and therefore they won’t.

GAPS

So what specialists will do sometimes or at least have been reported to do is to, at the beginning of the day, just like this is here, if they don’t want to do with this, they want to move the market to a higher price, they’ll just gap it over those resistance levels. So we closed here and then they opened us up here. And that way it’s like okay, done.

Don’t have to deal with it, don’t have to deal with people worrying about all that. And you notice it stays above that zone, and also you’ll notice that once we get above this cluster of all these lines, then the lines space out again.

So we’ve got R2 here, and there is yesterday’s high. Yesterday’s high kind of marks the low of that zone. Here we get a couple of mid pivots, I’ve talked about these in another video. And well, wave 3 does come in to mid pivot but your primary levels are those. So support resistance levels are very very important and the primary ones that I use by the way are yesterday’s high, low and close. This is for day trading. Now those are seen by pretty much everybody as some of the most important levels.

Also previous major swing highs and lows. Those are going to be the ones that just stand out to everybody that people say, oh well, there is a major high so this one is one and that’s what this blue line is, the blue line is marking that high, has been one that stands out in the chart and that market participants were respond to. So in fact it’s the high of the day so far during that day.

FLOOR TRADER PIVOTS AND FIBONACCI LEVELS

Another one that I use is floor trader pivots, very common for day trading. So you’ve got, whether it’s your mid pivot point and there is R2, R1 is in here, again all these labels get kind of squished together because we have all these levels coming in together.

And another one that I will use is Fibonacci levels. So those are primary levels that I use for support resistance which are a blockage of the energy so people use these to buy off of, sell off of and to take profits into, so very very important you have them.

However again, remember today’s lesson, and last time’s lesson. You can’t learn day trading by using support/resistance by itself. We have to look at what kind of energy the market has, as it comes into those levels because support resistance levels are broken all the time. All the time. And so therefore we have to ask ourselves, so for example just look at one example right here. Here is R2. A floor trader pivot level. The market comes up into it. Now the question is, will it hold this resistance level or will it break through it? How do you determine that?

PUTTING IT ALL TOGETHER

Well first of all, the trend is up. That’s the green line here, the 50 moving average is angling up. Okay. That’s fine. But is it a strong trend that we do see a lot of momentum. So here is your zero line, is way down here. And yeah, momentum is well above the zero line. It’s up here and this is our moving average of momentum. And it is angling up, so it’s strong trend to break through resistance, you have to have strength.

Now when we get over here to wave 3 for example, look here is our higher momentum. Momentum’s going down to zero, and then even though we put in a higher high in price. We put in a lower high on momentum. So this is a weak high.

LOOK WHAT’S NEXT

Yeah price is higher but momentum has come out of the market. Therefore when we come into that resistance level, which is again mid pivot between R3 and R2. That resistance level holds. Market cannot break through it because it doesn’t have the strength to break through it. Right. So that’s how we determine which support resistance levels that the market will break through in which it will bounce of off.

We’re going to come up with part 3. In part 3 we are going to talk about, what I call the energy of scale or the fractal energy. And even though we may have trend and momentum and cycles and support resistance, even if we have all 4 of those energies on our side, I still will not take the trade unless the energy of scale conforms it. That’s one of the crucial issues when you learn day trading.

CYCLES FOR DAY TRADERS

Oh by the way we didn’t get to talk too much about the energy of cycles. That’s because that’s a pretty big topic, so I do a webinar on that. it’s a free webinar and I give you my cycle indicator absolutely free, and give you a tutorial on how to trade it, so since this is recorded and you might, I don’t know when each of you’re going to be watching this video, it can be any time in history.

Send me an email at Barry@TopDogTrading.com and I will be happy to let you know, at the time you email me when the next webinar and cycle is going to be held. And again it’s absolutely free and I give you the indicator and give you a tutorial on how to use it. It’s about an hour long so that’s why we don’t do it in these brief videos. So that’s it and in next one we’ll cover the scale or fractals.

NOW FOR THE GOOD STUFF!

I’m giving away one of my favorite trade strategies. Absolutely free. It’s called the Rubber Brand Trade. And it has an extremely high win loss ratio. It’s a very simple strategy and a great way to start to learn day trading. You can learn it in about 26 short minutes. Just fill out the yellow form at the top of the side bar on the right. Once you do that, I’ll personally send you an email with first video.

Pay It Forward My Friend

PLEASE “PAY IT FORWARD” BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons below.

Leave a comment below telling me what other stock market trading strategies you’d like me to teach in the future.

For another video on day trading for a living, Simply click here:
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Learn Day Trading Strategies That Work, Part 3

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VIDEO TEXT:

Welcome to part 3 of Learn Day Trading Strategies that Work in Today’s Markets. This is Doctor Barry Burns with Top Dog Trading. And today we are going to talk about what I call the fractal energy, or the energy of scale. Now that’s just a fancy term for talking about using multiple time frames.

When you talk about multiple time frames, what I’m saying is we are looking at the same market in this case it’s the stock Disney. But we’ll have 2 charts up. Number 1, we have the 2 minute chart there, and the 6 minute chart over here. So looking at the same market from two different scales.

THE RATIOS BETWEEN THE CHARTS WHEN YOU LEARN DAY TRADING

I like to use a 3 to 1 ratio. You can use a 4 to 1 ratio if you want. Or even a 5 to 1 ratio. But 3 to 1, I like, it keeps those two synchronized and very timely, very tightly correlated. So that’s my choice. Now you can use a daily chart on a weekly chart. You can use a 5 minute chart on a 15 minute chart.

If you want to use tick chart, you can use a 1,000 tick chart on 3,000 tick chart. That’s up to you. There’s no magic to a 2 minute chart or 6 minute chart. In fact it’s pretty fast. But anyway that’s the example for today.

THE TRADITIONAL MODEL ISN’T OPTIMAL

Here’s why I don’t follow the traditional method any more. The traditional approach is this. To say only trade, your setups in the direction of trend on the longer term timeframe. So let’s look at what we’re talking about here. Here’s one of my typical setups. And we just call this a first retrace in the trend setup.

We got wave 1, 15 MA started angling up. And we retrace back down to the 15 exponential moving average. We like to do that. That shows that the market hasn’t come too deeply against the direction of the initial impulse move. We want strong moves up. And then short moves down. If we expect the continuation of direction of the trend.

That’s working out great. Then we’ve got a cycle low, and momentum is holding above the zero line, so it’s strong momentum. And then, not only that, that’s actually acceleration but to get momentum with it, we are needing increase in volume. And we have all that. So okay, that’s the brief description of it being one of mine setups.

DON’T FORGET TO CONSIDER SUPPORT/RESISTANCE WHEN DAY TRADING

Oh, by the way for support resistance, the 15 EMA also provides support resistance and we got into a new territory which is yesterday’s high, we’re above yesterday’s high. Okay. So everything looks great there.

Now, even though that is a good setup, that I often take, will not take the trade unless it’s confirmed by the longer term timeframe. Or the bigger scale. And that in this case, as I mentioned is the 6 minute chart over here.

What we’re doing is, we’re saying, now the traditional approach again, is to say only trade in the direction of trend of the longer term timeframe. That would be the 50 MA over here. And we do have that. We do have the 50 MA going up. And that’s fantastic.

LEARN DAY TRADING THE NEW WAY – THE OLD WAY DOESN’T WORK!

However, the reason that I don’t use that anymore, is because markets have changed a lot over the years. And trends don’t sustain as much as they used to, back in the days when the old classic technical analysis books were written.

Back then, we didn’t have as much computerized training. I mean there were computers but your average person, your average retailer didn’t have a home computer. And so they didn’t have direct access, we didn’t have high frequency trading. A lot of the, you know technology has just gone dramatically off the charts. Even though there was some computerized trading back then, it’s not even close to what it were, or what it is today.

TREND IS ALWAYS A LAGGING INDICATOR

The other aspect of that is that trend is always a lagging indicator. By the way, the definition of the word trend according to Webster’s dictionary is “to extend in a general direction.” Very important to know that. There’s two ramifications of that definition.

  • Number 1. It means that you cannot use a short term indicator for trend. You cannot measure trend with the short term indicator. Why? Because it goes against the definition of the word. To extend in a general direction. It is by definition a long term measurement of the direction of the market. So to use any short term moving averages or any kind of indicator, doesn’t measure trend. Just doesn’t. So that’s number 1.
  • Number 2. There is a financial reason. And that is, we want to be, we want to be trading in the long term direction of the market. So that we get a good risk reward ratio. We want our losses to be small obviously. And our winners need to be big. So the way you do that is by using a long term indicator to get in on a long term move. Therefore taking your rewards long term and bigger than your losses.

Why would you use a lagging indicator on an already 3 times slower chart to confirm a trade on that slower chart. It doesn’t synchronize very well in a timely manner. And therefore it doesn’t give you a timely indication of entry. So we want to do the opposite.

What we want to do is use a potential leading indicator. Now nothing always leads the market. But a potential leading indicator, as we’ve talked before, and as I have demonstrated logically before, is momentum.

Here’s our momentum indicator and we just want to make sure that momentum is angling in direction of trade in this case up. And that is a faster indicator and therefore it helps to make up for the fact that this is a 3 times slower chart and synchronizes the signals to be more timely.

In this case we have both and that’s great. But we’ll look at example where we don’t have both. By the way let me do this here real quick, let me line up with global crosshair so you can see exactly where we would be entering. And we would enter on this bar right here.

Because of the global crosshairs you can see the vertical line on this 2 minute chart on the left. We’ve got the %K/%D cross, we’ve got the mom angling up. Over there we got the volume angling up, we’re bouncing off support already, that’s confirmed. Then on the longer term chart, the 2 minute chart you see that momentum down at the bottom is the green line that’s angling up. And its moving average versus purple line which is also angling up. So it conforms the trade. Okay, let’s look at an example where we have something little different.

TREND REVERSAL TRADES

Alright, so now we are going to talk about a trend reversal trade. Average trend is 5 waves. On the 2 minute chart on the left, you’ll see that we have 7 waves. And that’s an extended trend that’s when we can start looking for reversals. And we have a list of rules as to when we will take these reversal trades, but that’s the first thing that we look at.

When we’ve noticed that we’ve got big volume, that also helps us. We got cycle coming down, we’ve got momentum down over there, now look over at the 6 minute chart on the right. And there you will see, we have first of all an engulfing candle stick pattern. So that’s good. But trend is up. And yet we are looking to go short on the 2 minute chart.

This is a good example of how using trend to conform the trade is not going to work very well. Because even though sometimes trend confirms a trade, it’s a lagging indicator on an already 3 times slower chart. So you got your cycle trending over already. We’ve got a really good cycle pattern, what I call my second chance cycle patterns there on the 6 minute chart.

Below that, in the 3rd graph we have mom angling down, which is momentum. And that’s a red. You can see it’s got a 2 there as well. So basically we’ve got the confirmation we need which is not trend but momentum on the next higher time frame. It reacts faster and therefore it gives us more timely signals. So that’s the way that works better in today’s choppier, more fast action markets that are dominated by computerized trading.

This is the end of this 3 part series and I hope it will help you in your process to learn day trading.

GET MY A FREE TRADE STRATEGY FOR FREE!

I’m giving away one of my favorite trade strategies. Absolutely free. It’s called the Rubber Brand Trade. And it has an extremely high win loss ratio. It’s a very simple strategy and a great way to start to learn day trading. You can learn it in about 26 short minutes. Just fill out the yellow form at the top of the side bar on the right. Once you do that, I’ll personally send you an email with first video.

Pay It Forward My Friend

PLEASE “PAY IT FORWARD” BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons below.

Leave a comment below telling me what other stock market trading strategies you’d like me to teach in the future.

For another video on day trading for a living, Simply click here:
http://www.topdogtrading.com/trading-volume-on-day-trading-and-swing-trading-charts/

Go here to Subscribe to my YouTube Channel for notifications when my newest free videos are released:

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