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Breakout Trading Strategy Indicator Forex and Stocks

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Breakout Trading
Best Breakout Trading Strategy Indicator Forex and Stocks

Sticking with the most used, proven tools in breakout trading is what most traders do nowadays to avoid the risk of losing money as a result of false breakouts, and the like. However, this approach narrows them down to these few tools and forgo the greater reward that some uncommon tools may bring in predicting market movements in trading.

In order to have a competitive edge in trading; whether it’s Stocks, Futures, FOREX, etc., it is best to learn and use some uncommon tools that only a few people know about; the results and implications it generates, to win the market.

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Breakout Trading

Today, I’m going to share with you a FIBONACCI and FOREX stock market rarely taught, trading tool. It is called the FIBONACCI spiral. This is not to be confused with the fib ark or the Fibonacci circle drawing tool. This is different. So, first of all, I’m going to show you real quickly what it looks like. Then we’ll talk a little bit about it, the mathematics of it, and then I’ll show you how to actually use it on your chart. I’m using Thinkorswim here and we just go down here to FIBONACCI spiral. Basically, what you’re going to do is click and then release, and you’ll see what it does. So you can see it’s not really forming circles because the circle tool would connect here. These are expanding arcs or whatever you want to call them.

They continue to expand and that’s what the difference is between; this and the FIBONACCI circle or Fibonacci Ark drawing tool. Now, it only takes a lot of time explaining FIBONACCI to you today. You can look that up on the internet, Google it, and you can get all the information you want, but just as a quick little maybe 60-second introduction as to why we would even consider using these spirals. So your Fibonacci sequence is basically this and it goes on. This is the sequence; zero plus one equals one, one plus one equals two, one plus two equals three, and on and on and on it goes. So that’s where we get our numbers from. All right, now let’s talk about how that plays out in nature. So this is a basic diagram of the FIBONACCI spiral.

Fibonacci Trading Strategy

All right? How is that calculated? So the spiral is created by taking the numbers in that sequence and we begin with a golden rectangle and we break that down into smaller squares based on the Fibonacci numbers in the sequence. We divide each square with an arch. And by doing that, the pattern of the FIBONACCI spiral is created so you can see there and that you’ve got your number. So the bottom line is that mathematicians and scientists have found that this pattern is actually found in nature everywhere in nature. It’s just amazing. We find it in botanicals. You see this same kind of pattern in hurricanes. We see the pattern in the formation of galaxies overhead. The most famous example is probably the Nautilus Shell and we’ve all seen that of course

So how do we apply this to trading? What we’re going to do is it’s going to be applied to a chart and we’re going to create support resistance levels that are both a confluence of time and price support resistance. So what we do is we come down here to our drawing tool and we choose the FIBONACCI spiral. This is Thinkorswim again, and we have to click.

Then we pull it up to the high; let’s see if we can get that actual high there and lock it in. OK? So it’s created in our spiral as I showed you before, but now we’re applying it directly to the price bars. And as you can see here, it is a projection, so Fibonacci projects out into the future. So I drew it from this low to this high that your impulse moves because that is where we had our major thrust and then the market just went sideways from there.

Breakout Trading Strategy

Now what we’re going to be looking for is the breakout of the next spiral and it comes in right here. So you could look at this as a type of breakout trade if you want it to, but it adds. In other words, you can have resistance above there and we’ve got, again, typical, a little false breakout comes right back down here. But here, again, this tells you this is a good time and price because it is an arc, alright? Or spiral more properly. It is measuring both time and price in one tool. So it comes together at that time and at that price and that’s when we look for the breakout. All right, let me give you another example. Here’s how flexible this thing is by the way. It’s pretty cool because it’s really based on ratios.

Now we’re going to draw it from that low up to that high because that’s the next impulse move, right? That’s the next move from low to high. And then we’d go sideways. So now let’s come back down here and move our chart around a little bit and you can see again, this tool is not a tool for measuring precision moves to the bar, to the penny, to the pip. We’re looking for zones, for areas, so you don’t want to use this alone. You definitely want to use this with other tools that you’re already using what had been proven. So we’re looking for a little shift here and we broke through it and it’s not obviously right on the line, but after it gets very close up, now this one’s pretty good.

Breakout Trading Method

Here, we have a similar thing and this is the kind of thing that I look for with us. We’ve got resistance and, again, this is now the time that it breaks out of that previous high. So for breakout traders, if you’re looking for the breakout of resistance in both of these examples are showing you, then this is something that you can add to your repertoire and say ‘I’m going to wait until we get the confluence of time price as indicated by the FIBONACCI spiral’. And then, if I get other signals, volume, price bars, indicators, whatever else you use, you can use this in conjunction with that to add to the probability of your trade.

Now, one question I know that I’ll get is, ‘hey, where is this tool on my charting software?’ So I can’t answer that question for everybody. Unfortunately, I don’t know the details of every single trading platform out there. I know this is on Thinkorswim. So, please just contact your support team that provides you with a trading platform and ask even if they have the tool, because this is not a tool that is very common. It’s a great thing because if you’re using something that most people don’t use, that gives you an edge and that’s what you’re looking for in trading. This can be an edge where you see something on your charts that the person on the other side of the trade doesn’t see. They don’t see. That is why it’s actually kind of great that it’s not on that many trading platforms.

Rubber Band Trade Strategy

If you liked this video, please understand that sure, it’s free, essentially. But if you got value from it, you have a moral obligation to pay it forward by clicking on that beautiful little share button below. Also, if you’re watching on youtube gimme a thumbs up, and I especially cherish your comments, they really encouraged me to create more free tutorials.

Also, I’m going to give you a gift today, which is my rubber band trade it has a very, very high win-loss ratio and this is a trading actually start taking. I’m going to encourage you to do it on a simulator or a demo account first. Obviously, make it prove itself to you. But I’m going to give you all the rules, everything, and I want you to start making money.

So it’s a video that’s 26 short minutes and you can get it absolutely free by clicking on the image in the top right corner of this video or in the description below the video. And if you’re not watching this on youtube, then there’s probably a link below or an opt-in form on the side where you can request it. And after that, I will personally email the video to you with the rubber band theory and strategy.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

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FREE GIFT!

Also, I’m giving away one of my favorite a new Breakout Trading Strategy Indicator Forex and Stocks tutorials. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with the first video.

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Trend Following System

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Trend Following
Trend Following Trading Best Trend Following System in Today's Market

A trend following system is a form of forecasting. Traders have to forecast, as accurate as possible, the movement of the market and come up with a process/system to follow market trends to succeed in trading. Unfortunately, only a few traders have come up with an effective trend trading system. The rest are either just wondering how the market moved this way and that, or on the brink of quitting.

In this video, you will learn how to establish a tested Trend Following System to succeed in today’s market.

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Trend Following

Welcome to this video on putting together a trend following system. Today we’re going to talk about the basics of a trend following system which generally is considered; by the way, I will also add incorrectly, to be based on higher highs, higher lows. Now we all heard that; and that’s supposed to be a trend, that is not enough. So it’s not that that’s completely wrong, but there were some things in trading that are complete truth, the whole truth and nothing but the truth. Other things that you read about in trading are half-truths, and this is a half-truth. So let’s get to the whole truth and nothing but the truth and show you why that is not enough. In fact, I was on a Webinar the other day and I liked what a woman said.

I’ve adjusted what she said a little bit. I used to say, OK, so this is your basic Meta pattern and that’s true, but we’ve got to add more details to it in order to make it more specific and accurate and precise. So I said, the devil’s in the details, she said no heavens in the details. And I kind of like that thought. So I decided to change that up a little bit and to say the Dinero is in the details worth a dollar is in the details if you will. Let’s take this higher, high and lower high stuff off here because it’s not meaningless, but it’s not enough. So, let’s move our charge forward. Now, technically, if you look here, we do have a higher, higher from this high to that high, definitely a higher high.

Trend Following Trading Strategies

So, is that a trend that should we build a trend following system around that? And the answer is absolutely not. Now, it’s a higher high. That’s correct. But it’s not a trend continuation, and here’s why. So in the markets, you have to give the market some wiggle room. You’ve got to allow for some noise and chaos in the market. You’ve got to remember, there are people all over the globe who are trading these markets and they’re trading from different countries using different methodologies, different time frames, and different systems. Some are discretionary traders. Anyway, you get millions of people trading this stuff and nothing’s going to come out exactly to the penny, to the pip, to the tick or to the pixel on your chart. So the bottom line is you have to allow for that variance that is just part of the system.

What I do, instead of just saying, we need a higher high, I go like this, ‘I take a vertical or I’m sorry, a horizontal line and I’ll put it at that high’. That’s it. Looks like it’s about right there. And then I say, OK, we did make a higher high here. That is correct. But what actually is going on there, price-wise, is the dynamic of the auction place because that’s really what markets are. Markets are huge auction places. So what’s actually happening here? And if you’ve ever been on the floor of the exchange, like I have, you will really see and feel it’s a visceral thing, the energy of the money flow.

Trend Following Systems

And then when I came back to screen trading, I brought that experience with me and I’m like ‘now I understand the charts are just mapping the math of the mass psychology’. That’s going on through the exchanges. The real market is what’s going on between people and to these days, computerized systems and so forth. So, when we look at this, and again, allowing for a little bit of chaos, randomness and so forth in the market, what we see here is, sure, you get a higher high. But that’s just the very high of where we reached. What really was the auction place saying? In other words, the massive, what’s the mass psychology there? We got a little bit above it and made a little bit of a higher high, then the event, and right away the market reverses, right?

So it negates the Barbie for that in my type of candlestick analysis, a little bit different than most. I don’t really stick to the traditional Japanese candlestick pattern trading, a little outmoded. That’s my personal opinion. Anyway, we say that in top dog trading, the red bar negates the Green Barn. Then we get a neutral bar and then we make another attempt. And then again, now what happens? This bar is splitting this high, these highs. So it opens below, closes above; which is the high there, closes above. So the overall dynamic of the auction place is that it starts down here and up here, and we’re testing these areas. That’s what’s happening. But the market is constantly testing previous support and resistance levels because the market has memory, as they say in.

Trend Following Rules

So the participants were actually thinking, ‘that’s the value of the market that was established’, and well in this case about an hour ago. And people want to come back into that level, get a little nervous like uncertainty, which the market hates. And people are thinking ‘this is the highest value that people were willing to pay’. Again, think of it as an auction place. Think of it like selling your car, right? You might want to sell that car for $20,000 and that’s great, but if no one’s willing to pay you $20,000, you’re not going to sell it for $20,000 because there’s no one on the other side of that transaction to pay you that much money. Now they might sell and pay you $18,000 and then you have to decide whether or not you’re willing to take less or negotiate something in between.

That’s the exact same type of dynamic that’s happening here. So the answer here is no, no one’s willing to pay $20,000. Now, I shouldn’t say nobody. Oh, you can’t see the price there. Anyway, that’s a 121. So we’ve got a few, but we can’t get enough buying traction or there are not enough buyers to make this market sustain to the upside. Actually, let me forward to the right a little bit more so you can see what actually happens. So the way we read this again is, all right, this green bar here, that’s just an attempt. This is the market participants testing. Do the global markets, the global market participants, is their sentiment now bullish enough to break through that resistance level and say we’re willing to pay more than that no? And the very next bar, the red bar answers the question and says nope.

Trend Following Indicators

And, in market profile terms, this is called a rejection of value. I’m not the only one who talks about this stuff. This is now saying the market has and the term, again, is rejection of value. It’s tested. These higher prices and the global markets have rejected that, meaning not enough people are saying ‘I’m willing to buy that’. I believe the market is worth that. They’re saying ‘no, it’s not worth that much, that’s overpriced, I’m not buying’. And if you don’t get enough buyers coming in there, you don’t get into finding traction, it will not follow through and so, therefore, that is not so. For example, we call this a wave one and we called this a failed three because it attempted to go higher and it did go higher, but it actually could not again get enough traction so it actually becomes a bearish pattern.

It’s actually the opposite of trend following to the upside and it becomes a reversal pattern. So, that is the kind of thing we would actually take short. If you liked this video and you’ve got some value from it, of course, it’s absolutely free on the Internet. But, you know, I think we get so used to everything being free that we forget about our moral obligation. So, if you got value out of this, then I really encourage you, the best thing you can do is to click the share button. That is number one, click the share button below that provides value to other people. That’s your way of paying it forward. I don’t charge you anything for these lessons. I’ve got over 100 videos on youtube right now.

Rubber Band Trade Strategy

They’re all free and I don’t ask you to pay me any money, but the only thing I ask you to do is pay it forward and share it with other traders. So click that share button and share that value with other people. And by the way, click the thumbs up icon. That helps a lot. Comments I love and I’m also giving away one of my favorite trade strategies called the rubber band trade, which has a very, very high win-loss ratio. So this is a value added.

It’s also free by the way, but it takes a little longer than my youtube videos, so it’s 26 short minutes, but these youtube videos I try to keep to around 10 or 12 minutes, so I’ll be happy to give you my rubber band trade strategy absolutely free. You just click on the image and top right-hand corner of this video or the link in the description below the video, and if you’re not watching it on youtube, there’s probably a link below or an opt-in form on the side. Anyway, once you do one of those options, I will be happy to personally email the video to you. We have the rubber band trade strategy.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on Trend Following System? Enter your answer in the COMMENTS section at the bottom of this page.

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FREE GIFT!

Also, I’m giving away one of my favorite a new Trend Following System tutorials. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with the first video.

Those interested in Trend Following System that works in today’s markets also showed an interest in this video:
https://www.topdogtrading.com/trend-trading-with-moving-averages/

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Leading Indicators Example

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Leading Indicators
Leading Indicators Example

Leading Indicators are often taken for granted by most traders nowadays. Many say there’s no such thing as a leading indicator. They even take pride in saying they only use pure price action and volume. This most of the time leads to high-risk trading.

To better predict the movement of the markets today, one of the best ways is to study what actually leads them; that is, Leading Indicators.

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Leading Indicators

Hey, welcome to this video on leading indicators examples. However, there is no such thing as an indicator that always leads the market, so you have to put it in the context of an entire trading method, just like you do with everything. There’s no one indicator that’s going to be the crystal ball as to what’s going to happen in the next five minutes or five months in the market. That’s not how it works. We use it as a piece of the evidence.

Leading Indicators Example

So one of my most popular videos is on the SMI indicator or stochastic momentum index. We’ve got that down here and I’ll use that one today because, in the traditional technical analysis, momentum indicators are generally accepted as leading indicators. And I like to add the word potential to that because most of the time, they don’t lead to the market. So you have to understand what type of patterns do, when they do, and so forth. So, first of all, let’s look at something very interesting that people don’t understand. First of all, that’s not an indicator. Stochastics is not an indicator. SMI is not an indicator. CCI, when we just plot it here, in other words, that’s really not the indicator. Let’s look at what the indicator really is.

Now that’s the indicator. So it might be semantics, but my point in showing you this is, and this is just part of the formula and this is the SMI, the stochastic momentum index, indicators are mathematical formulas. So let’s just get real clear on that. First of all, that’s what they are and that’s all they are. So it is true that they do not always tell the future. But let’s put it this way. What do indicators do? They indicate! The answer is actually in the question. They indicate. Indicators are not money makers. There’s no one indicator in the world that will directly and by itself make you money. If they did, we wouldn’t call them indicators. We’d call them money makers.

Leading Indicators Technical Analysis

So they indicate something based on math. Here’s one example. What it’s taking is it’s taking data from whatever market you’re trading relative to whatever time interval you’re trading. And it’s putting everything into one side of the formula, crunching it based on the formula, and then spitting a number out the other end. So what that means is that an indicator actually is never wrong, indicators are correct 100 percent of the time because it is math. So one of the reasons that I do like to use a couple of indicators is that it gives me an objective number to work with a value of the energy of money flow that is going to that market.

And it’s always right because it’s based on math. It is math! It is not based on math, it is math. And, therefore, it allows me to create an objective rule-based system based on a mathematical formula; actually a combination. So let’s go back to the chart now. We’ve got our SMI here, stochastic momentum index. Remember, momentum is one of the most commonly accepted leading indicators. And we’ve got the market going down here. Now at this place, you will see what is commonly referred to as a divergence. So we have a lower low on price, higher low on the stochastic momentum index. Now, what does that really mean? What’s behind that? We’ve all heard what divergence is, or at least most of us who’ve been around for a while. And so a divergence is nothing new, but a divergence by itself, frankly, they don’t always work.

Leading Indicators Trading

So again, this is what I mean by, sometimes in certain situations, these indicators can give you leading ideas. Now, here’s what this is. First of all, what momentum means is the market’s going down and it’s going down on strengths. So think of a train going down the tracks and let’s say that train is going 90 miles. Well, let’s say it’s going 60 miles an hour and it’s got 30 cars behind it. Hence, it’s kind of velocity and mass. That is the equation for momentum ranked just the basic physics of it in the real world. In the same way in the market, when you’ve got the market moving with velocity and mass, it’s more likely to follow through.

So back to our training example, if you are to apply the brakes to a train that was going 60 miles, having 30 cars behind it, the train is not going to stop right away. There’s a leading indicator of just the pure physics of momentum. After you apply the brakes, that train is still going to continue to go north a mile after you apply the brakes, cause that’s the physics of momentum. So, in a similar way in the market, when the market is moving with velocity, a lot of mass; massive waste volume, then we can say it will probably sustain and when the brakes are applied, it’s going to start slowing down. Now, where is the brake applied?

Best Leading Indicators for Day Trading

So here is our signal that we’ve had a momentum shift. Price does make a lower low, in other words, the train is still going, in this case, south. But the brakes were applied back here and this maps it for us. That’s one of the nice things about indicators, they just map that dynamic flow on a chart. That’s why it’s actually very easy to see. Now you could do the same kind of thing if you’re a tape reader, but that actually requires quite a bit of skill and experience. So this is a shortcut.

But that’s not all because what we want to do is we also want to say ‘how extended are we in this trend?’ We all know the saying ‘the trend is your friend until the end’. If you get a momentum shift like this early in a new trend, it is probably not going to really mean much. You might get a little ABC complex retrace and then continue down in the direction of the trend. So the longer you wait; we’ve got a failed nine wave count here, and five in the way that count-wave is average. So, anytime we get beyond five, now we are saying statistically, this is a trend that has lasted longer than is normal. And now we wait for strengths to come out of that downtrend to help us determine when the trend will end. So this is the signal that it will end.

Best Combination of Indicators for Day Trading

Now, something very important, ‘where does the market go?’ Kind of going sideways for a while. So, the learning moment here is that just because momentum did come out of the market and sure we did stop trending, we did not get below that bar. That does not mean the markets then going to go screaming up; a downtrend is not always followed up by an uptrend. Uptrends aren’t always followed by downtrends. Trends can end, in fact, I would say trends more frequently end by just going sideways for a while and not reversing. This is why I turned.

Reversal trades are so tricky. They do have the best reward to risk ratio when they work, but they don’t actually work out often. So the win-loss ratio is low. I wanted to give you one more example because I showed you how to determine the end of a trend. Well, how do you get in early to a new trend because that is a more common way of a better win-loss ratio? Here, we’ve had a market just kind of, basically, not doing too much and even in here, right? It’s still kind of going sideways. But look at momentum. What is momentum doing from here to here? It’s still about the same and then it goes crazy? It goes way above that level. In other words, momentum, in this case, the SMI is breaking above this level here on the indicator before price really makes significantly higher highs.

Best Leading Indicators

Price is still just going sideways. So what’s happening is accumulation. In Top Dog Training, we like to take the first cycle low and a new uptrend, which is wave two right there. And we can do that inside of price consolidation knowing that momentum has already come in.  But now, here it is again, ‘how do we know to get out there?’ Well, momentum now has come out of the market, so price made a higher high, but the indicator, lower high. There are your common diversions. Therefore, it’s just a matter of time before we do start coming to an end.

Rubber-Band Trade Strategy

Now if you like this video, if you got value from it, please understand that sure, it’s free! But you do have a moral obligation to pay it forward by clicking the share button below. Also, I’d love it if you give me a thumbs up and leave a comment. I love your comments, they really encouraged me to create more tutorials.

Also, I’m giving away one of my favorite trade strategies called the rubber band trade. It has a very, very high win-loss ratio going to give it to you absolutely free and a 26-minute video. And this gives you everything; all the rules on how to do the rubber band trade. All you have to do is click on the image at the top right corner of this video, or also in the description below the video. There’s a link where you can access it and, if you’re not watching this on youtube, then there’s probably a link either above or below this video or an opt-in form on the side. Once you do that, I will personally email the video to you with the rubber band trade strategy

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on Leading Indicators? Enter your answer in the COMMENTS section at the bottom of this page.

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

FREE GIFT!

Also, I’m giving away one of my favorite new Leading Indicators tutorials. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with the first video.

Those interested in Leading Indicators that work in today’s markets also showed an interest in this video:
https://www.topdogtrading.com/tape-reading-tutorial-for-futures/

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Tape Reading Tutorial for Futures

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Tape Reading for Futures
Tape Reading Tutorial for Futures Made Simple

Tape Reading for Futures is one of the fundamental principles of becoming a profitable trader. But the DETAILS of how to identify them are rarely taught.

Some traders are boggled with who to follow when trading. They struggle to identify the smart money due to the lack of information they have and are ultimately facing the inevitable risk of losing money.

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Tape Reading Course

All right, hello and welcome to this video on tape reading for, well actually it’s a tape reading tutorial for futures, but it applies to stocks too.

Tape Reading for Futures

So we’ve got a little higher high here. This is the point where you can see the Blue Line. Question is, will it continue to follow through to the upside or to the downside? And markets are moving faster than I can talk, so I’ll read again to see what’s happening. But in real life, I get started talking a little bit late. How would you determine that? That’s one of the big questions. Whenever you talk to a trading teacher, you should always ask them the question of, well, how do I determine whether you know this is going to happen or that’s going to happen? Tell me specifically, tactically, exactly, specifically give me the rules. So here’s one of the rules that I use.

Tape Reading Technique – Futures

I bring up a time and sales window which you see on the right side of the chart there. And with that, you can actually see each order that comes through the market. So now we are seeing not just the volume histogram at the bottom, which is limited; that shows you the total number of, in this case, contracts, because we’re looking at the NQ when the Nasdaq 100 futures. But we’re actually seeing each order and the volume of each order. Now, I’ve got that customized so that I don’t see any orders less than five contracts. I am not interested in anybody trading one, two, three or four contracts. So I’ve gone and filtered those out.

I’m only interested in a little bigger orders. I’m not interested in the amateurs here, that really means nothing to me. So I want to filter them out and I do. I’m only looking at trades for five contracts or more. And even there, obviously you’re going to get some amateurs. But as you can see, when we had the little breakout there, and this is a big problem, right? False breakouts; How do we determine whether it’s going to be a false breakout or if breakouts are going to follow through to the upside? So this is one of the solutions. This is one of the how-tos; by bringing the time and sales window and looking at what is the dominant direction, or I should say the direction of the dominant energy of the market.

Tape Reading & Market Tactics – Futures

You can also put bids and asks in there. You’ll see the bids and asks at the top – I really couldn’t care less about the bids and asks, these mean nothing to me. So I filter those out as well and I only look for the actual orders; the commitment of the money that the market participants are putting in because that I know they’re serious about. Bids and asks can be pulled and they can game the market that way. Therefore, that’s meaningless to me.

Find the Smart Money

Now, I want to know that talk is cheap. Actions speak louder than words. Bids and asks are talks, and actual orders are being filled. Those are actions, and that’s what I want to see. As you can see, that dominates the red here and it has, ever since the breakout, and we’ve got some decent-sized orders, nothing really big right here now. But at least, these are not people who are just trading with the very minimum accounts available. That’s not going to be your smart money people. We want people who have decent-sized trading accounts and therefore can afford to trade five contracts.

And remember, when they’re trading five contracts, that might not just mean that they’re trading five contracts on that trade. They might be sizing in. So they’re trading five contracts, and then they get in with another seven, and then another eight, et cetera. So keep that in mind as well. It doesn’t mean that their whole position is five contracts. So that’s part of the reason why I do that. Anyway, the mark is still going down here, so let’s take a stop. We’ve already seen this false breakout and let’s stop here and look at another example.

Market Analysis – Futures

So now we are coming down, you see the Blue Line below us? That’s support. So now the next question is, ‘is the market going to hold that support and bounce off? Or is it going to breakthrough?’ Well, again, the market’s moving pretty fast. But look at the time and sales window. So anything that’s over 20 contracts, I designate as a block order and that just means those are really big orders. Anyway, we broke through that support. Therefore, that support level no longer exists and you could see that we broke down below that. And you can tell that because, with price bars alone, you may not be able to see that. But when you look at the time and sales window, you can say, okay. So not only do we have a lot of sell orders, but there’s big volume in each one of those orders.

And we had those what they call block orders and look again, still red, red, red. There’s another block order that’s coming through at 25. We’re in another support level and let’s see what happens here. Now we’ve got some green block orders: 37, 20, 10, and 38. And so we’re getting some big orders, more green orders coming through and see, the market goes back up. And technically, basically now more block orders and the green side, the buy side. So the market’s not really breaking through that support level. Got a little below it, a few texts or whatever. But we’re holding it, holding a middle level. We’ve got some buying coming in here, some accumulation coming in. Hasn’t really pushed the market back up yet, but we are indeed seeing lots of buying, lots of buying, lots of buying, and large orders coming in.

Rules of Economics – Futures

You’re always going to get buying and selling because it takes both to make a market. Obviously, every time somebody buys, someone else has to be selling and someone selling, they’ve got to buy. And so there we go. Now by the way, when it’s light green like that in the time and sales, that means people are actually overpaying a little bit. That’s a sign that either they’re getting a little slippage, or they’re just being really aggressive on the buy side. When it’s Magenta, then they’re being a little aggressive on the short side. And they’re getting some slippage there. So there we go. You’ll notice it doesn’t happen necessarily right away on the spot, at the moment. That’s what is called an accumulation. People are taking positions, building along the positions.

And then we got another block order at 27. So that’s the smarter money. So to say, we’re back above that. What was the support level now? And we are coming back up and that accumulation now has turned into an actual reversal of the market direction.

Tape Reading Made Simple – Futures

So that’s how they do tape reading. That’s your tape reading tutorial for futures. And this is, basically, what I do and watch for it, especially at support resistance levels. This is how I primarily use it at support resistance levels and at swing highs and swing lows to determine whether the market will follow through, whether breakouts will follow through or whether they would fail and the support and resistance levels are going to hold or if the market’s going to fly right through them. So if you like the video, please understand that it’s free!

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Rubber Band Trade Strategy

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