How to become a profitable futures Day Trader! Trendlines, Supply and Demand and more!

Chrispy Trades・2 minutes read

The speaker shares insights from their four years of trading experience, emphasizing the importance of a reactive strategy, practical demonstrations, and the need for traders to independently learn how to identify and execute trades rather than relying solely on copy trading. They detail the use of technical indicators, such as the RSI and Bollinger Bands, and highlight the significance of understanding price action and psychological aspects of trading to make informed decisions effectively.

Insights

  • The speaker highlights their personal experience in trading, emphasizing that visual learning and practical engagement are key to mastering trading strategies, which they plan to share with participants to foster a supportive learning environment.
  • They developed a competitive trading strategy after initially starting without a clear plan during the GameStop and AMC events, crediting their anonymous mentor for guiding them to a more effective approach that adapts to market conditions rather than following rigid patterns.
  • The speaker stresses the importance of independent learning in trading, warning against the pitfalls of copy trading and quick profit-seeking mindsets, and encourages participants to actively engage in the learning process by taking notes and understanding the underlying strategies.
  • A detailed explanation of technical indicators and chart patterns is provided, including the use of the Relative Strength Index (RSI) and Bollinger Bands to identify potential market movements, with a focus on the significance of mapping supply and demand levels for informed trading decisions.
  • The session will include practical demonstrations and a structured approach to trading across multiple time frames, emphasizing the need for patience, discipline, and a comprehensive understanding of market behavior to enhance trading success.

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Recent questions

  • What is a trading strategy?

    A trading strategy is a systematic plan that traders use to make decisions about buying and selling assets in financial markets. It typically involves a set of rules and guidelines that dictate when to enter or exit trades based on various factors such as market conditions, technical indicators, and price action. A well-defined trading strategy helps traders manage risk, optimize their potential for profit, and maintain discipline in their trading activities. Strategies can vary widely, from simple approaches based on price movements to complex systems that incorporate multiple indicators and time frames. Ultimately, the effectiveness of a trading strategy depends on the trader's ability to adapt it to changing market conditions and their own risk tolerance.

  • How do I start trading?

    To start trading, you should first educate yourself about the financial markets and the instruments you wish to trade, such as stocks, forex, or commodities. Begin by learning the basics of trading, including key concepts like market orders, limit orders, and the importance of risk management. Next, choose a reputable brokerage that offers a trading platform suitable for your needs. Many brokers provide demo accounts, allowing you to practice trading with virtual money before risking real capital. Once you feel comfortable, develop a trading plan that outlines your goals, risk tolerance, and strategies. Finally, start trading with a small amount of capital, continuously learning and adjusting your approach based on your experiences and market conditions.

  • What is the importance of risk management in trading?

    Risk management is crucial in trading as it helps protect your capital and ensures long-term sustainability in the markets. By implementing effective risk management strategies, traders can minimize potential losses and avoid significant drawdowns that could jeopardize their trading accounts. This involves setting stop-loss orders to limit losses on individual trades, determining position sizes based on account equity, and diversifying investments to spread risk across different assets. Additionally, risk management encourages traders to maintain discipline and adhere to their trading plans, preventing emotional decision-making that can lead to impulsive trades. Ultimately, a solid risk management approach allows traders to navigate market volatility and increases the likelihood of achieving consistent profitability over time.

  • What are technical indicators in trading?

    Technical indicators are mathematical calculations based on historical price and volume data that traders use to analyze market trends and make informed trading decisions. These indicators help identify potential entry and exit points, as well as market momentum and volatility. Common technical indicators include moving averages, Relative Strength Index (RSI), Bollinger Bands, and MACD (Moving Average Convergence Divergence). Each indicator serves a specific purpose; for example, moving averages smooth out price data to identify trends, while the RSI measures the speed and change of price movements to indicate overbought or oversold conditions. By incorporating technical indicators into their analysis, traders can enhance their understanding of market dynamics and improve their chances of successful trades.

  • What is the role of a trading mentor?

    A trading mentor plays a vital role in a trader's development by providing guidance, support, and knowledge based on their own experiences in the financial markets. A mentor can help new traders navigate the complexities of trading by sharing strategies, best practices, and insights that may not be readily available through self-study. They can also assist in developing a personalized trading plan, helping mentees understand their strengths and weaknesses, and fostering a disciplined approach to trading. Additionally, a mentor can offer constructive feedback on trading performance, helping traders learn from their mistakes and refine their techniques. Ultimately, having a mentor can significantly accelerate a trader's learning curve and increase their chances of achieving long-term success in the markets.

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Summary

00:00

Empowering Traders Through Visual Learning Strategies

  • The speaker emphasizes the importance of visual learning, sharing that they have been trading for four years and learned best through personal experience, which they aim to apply to help others in the session.
  • They began their trading journey during the GameStop and AMC events, initially lacking a clear strategy until this year, when they developed a strategy with a competitive edge, which they are now ready to teach.
  • The speaker credits their mentor, a highly successful and private trader, for teaching them the strategy, noting that this mentor has achieved significant payouts and prefers to remain anonymous in the trading community.
  • They highlight the importance of having a reactive trading strategy rather than a rigid one, explaining that their approach adapts to market movements rather than relying on specific patterns.
  • Participants are instructed to have writing materials ready for note-taking, as the speaker emphasizes the need for active engagement and the importance of learning rather than just copying trades.
  • The speaker expresses frustration with individuals who seek quick profits without putting in the necessary effort, stating that only a few people from their previous calls have successfully made money from their trades.
  • They stress that relying solely on copy trading is unsustainable, as market conditions can change rapidly, making it crucial for traders to learn how to identify and execute trades independently.
  • The speaker aims to create a knowledgeable group within the trading community, where members can support each other and share insights, contrasting this with previous experiences where many participants lacked understanding.
  • They clarify that there is no single "best" trading strategy, and while they will teach their own, they encourage participants to explore various methods to find what works best for them.
  • The session will include practical demonstrations on charts, with the speaker planning to share their screen to illustrate their trading strategy and ensure participants can follow along effectively.

13:56

Effective Price Mapping for Trading Success

  • The strategy involves using a combination of technical indicators, including the RSI, Bollinger Bands, and two key lines: the blue VWAP (Volume Weighted Average Price) and the purple Trauma line from Lux Algo, which identifies significant price levels based on historical highs and lows.
  • Supply and demand levels are marked on the chart, with purple indicating strong levels and white indicating weaker ones. These levels are crucial for identifying potential price movements and should be mapped out regularly.
  • To effectively map levels, start with a higher time frame, such as the 3-month chart, and identify key price points where price action has previously touched and rejected, marking these with purple lines for significant levels.
  • Each week, reset the chart by deleting all previous lines and re-mapping levels based on the last three closed monthly candles, focusing on the top and bottom wicks and the candle bodies to establish support and resistance.
  • The process of mapping levels involves using keyboard shortcuts, such as "Alt + H" to automatically draw lines, making it a repetitive but straightforward task that should be done weekly to maintain accurate levels.
  • When analyzing the daily chart, switch to white lines for mapping levels, and look for areas where price has rejected or bounced multiple times, as these indicate significant support or resistance levels.
  • The 4-hour chart is also used to identify micro-levels, but trading at all-time highs can be challenging due to the lack of previous price action to reference, making it essential to focus on recent price movements.
  • Understanding how to read candles is vital; each candle's open, close, high, and low points provide critical information about price action, and all four points should be considered when mapping levels.
  • The strategy can be applied to various tickers, not just index funds, and involves consistently using the same mapping process across different time frames, including the 3-month, 1-month, 1-week, daily, and 4-hour charts.
  • Regularly reviewing and adjusting mapped levels based on new price action is essential for successful trading, as it allows traders to make informed decisions based on the most current market data.

32:00

Bearish Trading Strategy Using RSI Analysis

  • The analysis begins with a price level of 264, where a rejection occurs after a higher high closes below resistance, indicating a bearish trend and suggesting a short position if the price breaks below 246, leading to a potential drop to 180.71.
  • The Relative Strength Index (RSI) shows bearish divergence, which is a critical component of the trading strategy, emphasizing the importance of recognizing RSI divergences for identifying potential market reversals.
  • The RSI is defined as a momentum oscillator that measures the speed and change of price movements on a scale from 0 to 100, but the focus here is on trend lines and divergences rather than specific RSI values.
  • To set up the RSI indicator, input the following settings: RSI length of 14, source set to close, moving average type as Bollinger Bands, moving average length of 34, and standard deviation of 2.
  • The analysis suggests starting the trading day by reviewing larger time frames, such as the 4-hour and 1-hour charts, to gauge market sentiment; for example, on May 9th, the 4-hour chart indicated bullish conditions.
  • A rising wedge pattern is explained as a price action that gradually ascends after a significant move, with multiple touches on a trend line indicating potential for a downward breakout once the trend line is breached.
  • The importance of confluence in trading setups is highlighted, with three key factors: the presence of a trend line, hitting a resistance point, and observing bearish divergence on the RSI, all of which strengthen the case for a short position.
  • The concept of a "reset" in the RSI is introduced, where the RSI returns to the Bollinger Bands while the price remains higher than previous levels, allowing for potential bullish continuation as seen in the example where the RSI reset at 180.71.
  • The Bollinger Bands are crucial for identifying market volatility; when they are tight, a significant price movement is expected, and when they open up, it indicates potential for further price action in either direction.
  • The strategy emphasizes waiting for the RSI to return within the Bollinger Bands for potential long positions when oversold, and short positions when overbought, while also considering the context of higher time frames for confirmation.

47:41

Effective Trading Strategies Using Price Action

  • The discussion revolves around trading strategies, particularly focusing on price action and the use of technical indicators like Divergence and Bollinger Bands to identify potential long and short positions in the market.
  • A specific date, May 9th, is highlighted as a reference point for analyzing price action, demonstrating how the strategy can effectively identify market movements, including a significant short opportunity after a price dump.
  • The concept of Divergence is explained, emphasizing its importance in determining entry points for trades, particularly when the price hits key levels such as the Bollinger Bands, which can signal potential reversals.
  • The speaker mentions the significance of previous breakout levels and pre-market lows in identifying potential trade setups, indicating that these levels provide critical context for making trading decisions.
  • The analysis includes the identification of a rising wedge pattern, which, when broken, leads to a downward price movement, showcasing how traders can use chart patterns to predict market behavior.
  • The importance of using different time frames for trading is discussed, with the 15-minute chart being recommended for capturing larger moves, while the 5-minute and 1-minute charts are suggested for more precise entries and scalping opportunities.
  • The speaker explains the mechanics of entering trades based on smaller time frames, highlighting the need for confirmation through candle closures and retests of trend lines to validate trade setups.
  • VWAP (Volume Weighted Average Price) is mentioned as a tool for trimming positions rather than for entry or exit points, indicating its role in managing trades rather than initiating them.
  • The discussion includes practical examples of how to identify and trade various chart patterns, such as falling and rising wedges, and the significance of bullish Divergence in confirming potential upward movements.
  • The speaker emphasizes the importance of patience in trading, advising against premature entries and highlighting the need to wait for clear signals from the market before committing to trades.

01:04:24

Mastering Trading with RSI and Divergences

  • The speaker prefers to enter trades in the morning rather than swing trading overnight, as price action typically becomes clearer after the market opens.
  • The Relative Strength Index (RSI) is used to identify price action trends, with bearish divergence indicating a potential price drop and bullish divergence suggesting a price increase; these divergences can be observed repeatedly.
  • A specific example of bullish divergence occurred on May 9th, where a break above a trend line led to new all-time highs, demonstrating the importance of recognizing divergences on larger time frames.
  • The RSI's behavior is crucial; when it trends downwards while price remains stable, it indicates a bullish divergence, suggesting a potential upward movement after a reset.
  • The speaker emphasizes the significance of trend lines and divergences in trading strategy, stating that successful trading relies on identifying these patterns and entering trades at the right moments.
  • The Bollinger Bands are used to assess price action; when the RSI is below the band, it may indicate a potential bounce back, while movements above the median line suggest bullish conditions.
  • The speaker advises waiting for the RSI to break above trend lines before entering trades, as this can signal a continuation of upward price movement.
  • The strategy involves using multiple time frames, with the five-minute and one-minute charts for scalping and the fifteen-minute chart for a broader market perspective.
  • The RSI can be used to identify specific levels where it typically bounces, which is particularly useful for larger time frames like the four-hour and one-hour charts.
  • The speaker notes that understanding the psychological aspects of trading is crucial, as many traders struggle with discipline and timing, despite the technical aspects being relatively straightforward.

01:20:41

Understanding Price Action for Effective Trading

  • Price action refers to the movement of stock prices and is crucial for trading decisions, focusing on patterns like lower highs, higher lows, lower lows, and higher highs, which are essential for entering trades and identifying continuation.
  • Traders should note specific price action patterns, as they indicate potential trade entries; for example, a lower low followed by a higher high suggests a bullish continuation if the price closes above the previous high.
  • An example discussed involved a trading scenario from last Tuesday, where a candle did not close below a support level, leading to a bullish reversal instead of a downward continuation.
  • The importance of time frames is highlighted; for instance, a five-minute candle closing under a support level could signal a short opportunity, but traders must consider the larger time frame context to avoid false signals.
  • The Relative Strength Index (RSI) is used to confirm price action; a bullish divergence occurs when the price makes a lower low while the RSI makes a higher low, indicating potential upward movement.
  • Specific trading strategies include scalping, where traders take advantage of small price movements, and understanding when to enter or exit trades based on price action and RSI signals.
  • Recommended tools for trading include the Volume Weighted Average Price (VWAP) for tracking average price throughout the day, with standard settings for VWAP and RSI provided for consistency in analysis.
  • The discussion emphasizes the importance of trend-following, advising traders to buy high and sell higher rather than trying to short at perceived tops, as the overall trend may still be bullish.
  • The session also covered risk management strategies, including how to size trades and trim positions effectively, which will be elaborated on in future lessons.
  • For trading platforms, "My Funded Futures" is recommended for its favorable account conditions, including a $50,000 account for $132 with a profit goal of $4,000 and a maximum drawdown of $2,000, while desktop trading is preferred for better visibility and ease of use.

01:39:18

Trading Strategies with My Funded Futures

  • In trading with My Funded Futures, if you make $2,000 but do not close the position and it returns to your initial balance of $50,000, you can still draw down to $48,000 without being liquidated, unlike Apex where you would be liquidated at break-even. The first $10,000 earned is yours, and choosing the right trading firm significantly impacts success rates.
  • My Funded Futures allows a maximum position of five contracts with unlimited trades, while each mini contract consists of ten micro contracts. For every mini contract, a 10-point move equals $200, meaning each dollar movement is worth $20. To become funded, a trader needs a 200-point move with one mini contract.
  • Transitioning to a funded account is straightforward, with funding typically received the next day, and the same trading rules apply. However, traders cannot hold positions two minutes before significant news events, which are listed under tier one news.
  • The strategy discussed includes using pre-market highs and lows as critical levels for trading decisions, as these levels are often respected when the market opens. Breaking a pre-market low can lead to significant price drops, as demonstrated by a recent instance where a break led to a 200-point decline.
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