trade setups, rules & trading strategies · trading strategies using technical analysis to...

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Trade Setups, Rules &

Trading Strategies

Using Technical Analysis to Enter, Manage and Exit Trades

v.1411

FreeTradingVideos.com, Inc. dba Grok Trade

Quote of the Day

“At Grok Trade, we do not trade

‘Trading Patterns’.

“We trade the breakouts or

breakdowns from trading

patterns.”


Bullish Pattern Breakout Rules

Bullish Patterns

1. Golden Rules - Bullish. SPX ; Fundamentals; Trading Pattern

2. Long entry at minor trend line.

3. Confirming volume with

breakout.

105

Puts the odds in our favor.


Pattern Breakout Order Entry

Set Entry Order Above minor trendline.

Use a Stop/Limit order Stop = minor trendline.

Limit = 5-10 cents more than stop

price.

Set Stop-Loss Below bar’s low by ¼ of “trading

range”

Manage based on S/R line; Bars or

moving averages.

106

Entry

Stop-Loss


Position Sizing

Risk per share = Entry - Stop loss.

Position size =

Max $ Risk /Risk per share.

Example

Max risk $350 per trade

$.63 per share Risk

$350/$0.63 = 555 shares

107

Entry

Stop-Loss


Breakout


Bearish Pattern Breakdown Rules

Bearish Patterns

1. Golden Rules – Bearish. SPX ; Fundamentals; Trading Pattern

2. Short entry at minor trend line.

3. Confirming volume on

breakdown

108

Puts the odds in our favor.


Pattern Breakdown Order Entry

Set Entry Order (sell short) Below minor trendline.


Limit = 5-10 cents less than stop

price.

Set Stop-Loss Above bar’s high by ¼ of “trading

range”

Manage based on S/R line; Bars or

moving averages.

109

Entry

Stop-Loss


Breakdown


Practice Order Entry

Set Entry Order Above/Below minor trendline.


Limit trigger +/- 5 to 10 cents

Set Initial Stop-Loss Below/Above bar’s low by ¼ of

“trading range”


Exercise: Set Orders 110


Set Orders Exercise

111


STOP-LOSS-- IMPORTANT


Stop-loss Rules

How a trade is exited is more important than

how it is entered.

KEY STOP-LOSS RULES:

• Never trade without a stop-loss.

• Always calculate acceptable loss (mathematically

and emotionally) before trade.

• Never move stop against trade.

112


Stop-loss Options

1. Based on bars (static); aggressive-- will stop out

faster.

2. Based on moving average(s) – Breathing room--

helps catch nice moves.

3. Based on swings; usually too much risk.

4. Based on trendlines; Usually offers acceptable risk

5. Based on trailing stops; Only use when unable to

manage trade yourself.


Stop-loss on Bars

Manage stop after each

closed bar ¼ the trading

range above/below the closed

candle.

Tighten stop-loss near target

areas, support/resistance

areas or after extended runs.

Very Aggressive.

113


Stop-loss on MAs

Select moving average(s)

stock is “Honoring”.

Moving averages “move,”

so stop-loss areas can be

subjective.

Best practice: Wait for bar

to close below/above

before triggering exit.

Tighten stop-loss near

target areas, S/R areas or

after extended runs.

114


Parabolic Run Stops

Set stop just under 8ema.

Focus on static (closed) candle.


Parabolic Stop-loss - 8ema 115


Stop-loss on Swings

Stop-loss based on swing

highs or lows.

“Swing” is second bar’s

higher-high or lower-low.

Must have two (2) legs.

Set stop above/below

highest/lowest close of

swing---not “body” or

high/low.

116


Stop-loss With Trendline

Best practice: Use MINOR

trendline to trigger a stop.

A trendline needs two

points (swings) to draw a

straight line.

Tip: Wait for a close below

trendline before engaging

exit order.

117


Trailing Stop-loss

Automatic trailing stop setup.

Set amount to equal Average True

Range (ATR) + 25-33%.

Trail with either % or $ amount

Remember initial risk -0.75% rule

It’s better to use trailing stops

when you are not able to manually

manage the trade yourself.

118


Profit Taking

Target Exit

Use sell limit order to exit all.

Partial Exits

Take partial exits (i.e. 33%; 50%)

with stop limit order at:

Support or resistance areas.

Whole numbers.

Moving averages.

Extended rallies.

Adjust Stop-loss share amount for

remaining position.

Stop out on the rest.

119


Stop-loss Exercise 120


Stop-loss Exercise 121


Extended Range Candle Stop

5x normal trading range.

Set stop at just below 50% of candle.

Look at 5min chart and look for areas on

consolidation; set stop just below.

122


Stop-loss for Extended Range Candle


TRADING PATTERN QUIZ

This there a trading pattern?


Trade Setup—yes or no?


123

a. Trade Setup?


124

b. Trade Setup?


125

c. Trade Setup?


126

d. Trade Setup?


127

e. Trade Setup?


128

f. Trade Setup?


129

g. Trade Setup?


During Break – How Many Trading Patterns? 133


MULTIPLE TIMEFRAMES


Timeframe Point

• Higher timeframes trump lower timeframes. • Price action is directly influenced by the price action of higher

timeframes of a particular security.


Timeframe Point

• Trades should always coincide with the direction

(up/down) of leg/trend of HIGHER timeframe.


Selecting Higher Timeframe

Decide on a higher timeframe by 5 to 6

times more than timeframe traded. Ex. Swing Trade (daily/weekly)

Ex. Day Trade (5min./30min.)

WHY? The average (long) leg in a swing is

between 5-6 bars.

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131


132


GAP STRATEGIES

1-2-3 Punch Gap Trades


Gaps

What is a gap? A break between prices on a chart that occurs

when the price of a stock makes a sharp move up

or down with no trading occurring in between.


Gaps

Gaps can be caused by: Gaps can be created by a variety of factors

including, but not limited to:

News.

Company earnings announcement.

Analyst upgrade/downgrade.

FDA decisions.

Adjustment to earnings expectations

Economic data, and so on.


Axiom: Gaps tend to want to fill.

Axiom: Gaps once filled often retrace the direction of the original gap.

Gaps Axioms 134



#1 Fade the

Gap

#2 Pullback

Reverse

#3 30 min

Gap


GAP FADE STRATEGY

#1 Fade the

Gap


Fading Gaps

Find gap 1% to 5%.

Gap Up –Sell Short

First lower low.

Stop last high+.

Gap Down-Buy Long

First higher high

Stop last low+.

#1 Fade

the

Gap

135


Trade 1 of 3


PULLBACK REVERSE

#2 Pullback

Reversal


Pullback Reverse

Gap Up –Now Short

Breaks Stop.

Reverse to long

Stop below

Gap Down – Now Long

Breaks Stop

Reverse to short

Stop above

#2 Pullback

Reverse

136


Trade 2 of 3

Fade and

Bull Pullback

137


30-MINUTE GAP STRATEGY

Powerful Trade Strategy

#3 30 min

Gap


30-Minute Gap Strategy

1. At market open.

2. Find stocks that gap more than >1%.

3. SOH for 30 minutes.

4. Analyze market internals.

5. Set order above/below 30min high/low.

6. Manage stop-loss order.

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Bearish- 30-minute Gap


30 minute Gap

Gap Up –Now Long

Breaks 30 min High.

Go long/add to position

Manage Stop

Gap Down – Now short

Breaks 30 min Low

Sell short/ add to short

Manage Stop

#3 30 min

Gap

139


30-minute Gap Example 140


Trade 3 of 3

Gap fill

play



#1 Fade the

Gap

#2 Pullback

Reverse

#3 30 min

Gap


1-2-3 Fade/Bull Pullback/30-min

1 2

3

141


Trade 1 of 2

Fade and Bull

Pullback


Trade 2 of 2


Trade 1 of 2

Fade


Trade 2 of 2

Fade and Bear

Pullback


Trade 1 of 3


Trade 2 of 3


Trade 3 of 3


Bullish 30min. Gap Example


Bearish- 30-minute Gap


REAL SIMPLE STRATEGY (RSS)

Set-and-walk-away


Real Simple Strategy-Bullish 142

Set BRACKET ORDER (1 buy; 2 sells)

Enter confirmed breakout.

Set stop below support.

Set target exit 2x risk.

OCO order.

Walk away-- Let it ride.

40% win ratio – you make $$$.

T

E

S-L


SPECIALIST BEHAVIOR TRADE

Unconventional Trade


“Whitetails” & “Redheads”


Specialist Behavior 3-Questions

1. Is there a pullback?

2. Is there a whitetail (gap-down run-up)?

3. History of Specialist Behavior.

Enter limit order near close of day at ask.

143


“Red Heads” Located after an up-leg.

Watch for market correction thereafter.


“White Tails” Located after an down-leg.

Watch for market rally thereafter.


Specialist Play


Specialist Play 144


SECTOR ROTATION

Identifying Major Market Moves


145


FinViz.com- Groups 146


Quote of the Day

“We are what we repeatedly do.

Excellence, then, is not an act

but a habit.”

Aristotle


NIGHTLY ROUTINE

Critical Steps for Swing and Position Traders


Nightly Routine (Swing & Position Traders)

1. Assess the broad markets. • Watch Grok Trade broad market review.

• Check actual indexes or ETF’s (SPY, DIA, QQQ, IWM, etc…).

• Check market internals such as the TRIN, VIX, BANK, etc.

2. In brokerage account, find out… • What you got stopped in to or out of for either a profit or a loss.

3. Update TradeLog #1.

4. Adjust stops on existing positions.

5. Update TradeLog #2.

6. Assess unfilled orders. • Is it still a relevant trade (keep open, adjust or cancel)?

7. Update TradeLog # 3.

8. Check news and upcoming earning on current positions.

Part A – Current Positions and Orders

147


Nightly Routine (Swing & Position Traders)

1. Set up Watch List and Focus List. • Watch List – ready soon - close to setup.

• Focus List – perfect setup right now – at trigger.

2. Scan Existing Watch/Focus Lists. • Use 12 month daily for swing trades – 5 year weekly for position trading.

3. Use Scanning Tools. • Grok Trade vNewsletter Bull and Bear lists.

• Charting software proprietary scans.

• The IBD 50 (Investors Business Daily).

• Online scanners such as Finviz.com.

4. Closely Evaluate Stocks on Focus List. • Dig deeper to find confirmation.

• MACD, Stochastic, Money Flow, RSI, ATR, ADX, PVT, CCI …….

5. E.S.T. Your Trade; Added to TradeLog. • Set the Entry; Stop; Target with min 2:1 Reward / Risk.

Part B – Future Positions

148


Open Discussion


Homework

Scan charts and find:

Two Bullish trading patterns

Two Bearish trading patterns

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