Protecting your account and Your Profits

As traders with a small account, we

can’t have a lot of tolerance for
losing trades, and we shouldn’t. Like
most small account traders we are
looking to build up our account, and
2-2 REVERSAL
learn how to trade along the way.
THE STRAT SAYS CUT IT
How can we do that in such volatile
markets?

How do we know where to go?

YOUR ENTRY

How do we not give back all our

profits?

YOU STILL
HOLDING
#TheStrat

REVIEW
#TheStrat

THE
SCENARIOS
 1

1
SCENARIO 1 – Inside Bar

NEITHER SIDE
OF THE
PREVIOUS RANGE
TAKEN OUT
 2
2
2
2
2
2

SCENARIO 2

ONE SIDE
OF THE PREVIOUS
RANGE TAKEN OUT
3

SCENARIO 3 – Outside Bar

BOTH SIDES OF THE

PREVIOUS RANGE
TAKEN OUT
The 3 Universal Truths
• Actionable Signals

• Timeframe Continuity

• Broadening Formations

WE USE THESE TO CREATE WINNING POSITIONS, ADD TO THEM, AND

DEFEND THEM WITH TIGHT STOPS!
#TheStrat

ACTIONABLE
SIGNALS
 HAMMER
Forms after a previous lower trend series to
potentially signal a reversal off the lows. Open
and close are in the top 33% of the range and
candle.
This signal goes “In Force” above the high of
the hammer candlestick. (marked with yellow line)
We expect this to work for the following reasons.
Ideally, the shadow or “Wick” of the candle
2
represents an exhaustion of long side sellers
combined with ill timed new short positions
 MOMO HAMMER
Forms near the highs of a strong previous
uptrend. This signal becomes “In Force”
above the high of the hammer. (marked with
1
yellow line)

We expect this pattern to work on the

rationale that because it is in a strong
trend, the shadow or “Wick” of the
hammer candle only represents a profit
taking pullback combined with ill-timed
short positions.
SHOOTER
Forms after a previous uptrend to potentially
signal a reversal off the highs. Open and
close are in the lower 33% of the range and
candle. This signal becomes “In Force” below
the low of the Shooting Star Candle. (marked with IN FORCE

yellow line)

We expect this to work for the following

reasons. Ideally, the shadow or “Wick” of the
candle represents an exhaustion of short side
sellers combined with ill-timed new long
positions.
MOMO SHOOTER
Forms on the lows of a previous strong
downtrend. This signal goes “In Force” below
the low of the shooting star candlestick.

We expect this pattern to work on the

rationale that because it is in a strong trend,
the shadow or “Wick” of the shooting star
candle only represents a short covering
pullback combined with ill timed new long
positions.
INSIDE BARS
We do not trade any timeline
that is forming an inside bar. 1
Once that bar closes that bar
becomes an actionable signal.

The inside bar goes in force

once the next bar opens
above the previous range.

More on inside bars later.

 Why Price Moves
Actionable Signals is the "WHY" we can expect the price
to move.

Although we use Hammers and Shooters as

actionable signals, they are NOT universal truths,
as we don't know exactly why they formed.

Inside Bars ARE universal truths as they formed

#TheStrat

The
Reversals
 2-2 Reversal 2

When the hammer goes in force, it is a

2-2 reversal once the next live bar
opens as a scenario 2.

This reversal is to the upside. 2

 2

2-2 Reversal
2
When the shooter goes in force, it is a
2-2 reversal once the next live bar
opens as a scenario 2.

This reversal is to the downside.

2-1-2 REVERSAL
to the upside
This setup goes “In Force” as soon
as the price goes above the inside
bar.

This is a universal truth as it can not

be disputed that an equilibrium has
been formed, and a breakout of that 2 1 2
equilibrium is being attempted.
2-1-2 REVERAL
to the downside

This setup goes “In Force” as soon

as the price goes below the inside
bar.

1
2
3-1-2 Reversal
The 3-1-2 reversal goes in force once
the next live bar opens as a scenario 2
2
above or below the inside bar.

This one is a reversal to the upside. 3 1

3-1-2 Reversal 3
1 2
The 3-1-2 reversal goes in force once
the next live bar opens as a scenario 2
above or below the inside bar.

This one is to the downside.

THE NO NO ZONE!!!!!!!
THE DANGER OF
TRADING OF
TRADING ANY
TIMEFRAME STILL
FORMING AN INSIDE BAR
IS VERY SERIOUS, AND
WE AVOID THIS
SITUATION.

Most traders don’t know

this. We do!
 Danger of trading something that is still forming an inside bar

WEEKLY FORMING AN INSIDE BAR 60 MIN BARS ALL TRAPED IN A TIGHT RANGE

1
The Danger of trading something that is still forming an inside bar

Much like the multiple inside bar condition, this condition is

something few traders realize but is extremely important to
know.
We want to know if anything we are trading is STILL INSIDE a
mother bar on ANY TIME frame because it is considered
consolidating until it can make a higher high or lower low.
This condition is what causes the price to be "Choppy".
 IMPORTANCE
OF INSIDE
BAR SETUPS
Often times, the bar previous to
the inside bar called, "The Mother
Bar", represents a large enough
range where the inside bar set up
isn't strong enough to breach the
Mother Bar.

This usually occurs when the

inside bar forms in the middle of
the range.
OSTK 29 OCT 2020
This is where we AVOID the inside bar
set up as we can expect a new
broadening formation series to begin
as the price consolidates within the
Mother Bar. This we be covered in detail
when we get to the broadening
formation portion of the course.

However,
if an actionable signal is close
to taking out the Mother Bar, we can
take the trade on the belief the signal
will take the price beyond the mother
bars range.
#The Strat

TIMEFRAME
CONTINUITY
CONTROL CONFIRM CONFLICT CHANGE
CONFIRM
CONFLICT
CONFLICT
CHANGE
#TheStrat

Broadening
Formations
DRAWN BACKWARDS FROM RECENT HIGHER HIGHS, AND LOWER LOWS.
WE ARE IDENTIFYING THE LARGER OUTSIDE BAR
 EXAMPLE OF STOCK THAT IS TRENDING UP

We look for the larger

outside bar, and use this
to gauge magnitude. We
also check to see if this
stock is at the bottom
reversing back to the
upside, or exhausting at
the top, to test the other
side.
 EXAMPLE OF STOCK TRENDING DOWN

This is not a buy.

WHERE WE DON’T WANT TO BE
WHERE WE DON’T WANT TO BE
WHERE WE DON’T WANT TO BE
WHERE WE DON’T WANT TO BE
#TheStrat

LET’S DO IT!
 CREATING A
WATCHLIST
Go to Monthly charts and only
select stocks 2 up on the month.

EXAS 2up on the month.

 CREATING A
WATCHLIST
Go to Monthly charts and only
select stocks 2 up on the month.

FORD 2up on the month.

 CREATING A
WATCHLIST
Go to Monthly charts and only
select stocks 2 up on the month.

PTON 2up on the month.

 CREATING A
WATCHLIST
Go to Monthly charts and only
select stocks 2 up on the month.

SSTK 2up on the month.

LOOK FOR
ACTIONABLE
SIGNALS ON
THE WEEKLY
Remember we want the next
weekly bar to reconfirm what
we are seeing on the monthly.

EXAS is this an actionable

signal?
NO.
LOOK FOR
ACTIONABLE
SIGNALS ON
THE WEEKLY
Remember we want the next
weekly bar to reconfirm what
we are seeing on the monthly.

FORD is this an actionable

signal?
YES, inside week.
LOOK FOR
ACTIONABLE
SIGNALS ON
THE WEEKLY
Remember we want the next
weekly bar to reconfirm what
we are seeing on the monthly.

PTON is this an actionable

signal?
NO, but we could get a 2-2
reversal on the weekly.
LOOK FOR
ACTIONABLE
SIGNALS ON
THE WEEKLY
Remember we want the next
weekly bar to reconfirm what
we are seeing on the monthly.

SSTK is this an actionable

signal?
NO.
Entry and Stops
“60 Still
We use tight stops. If that good ADD”
actionable signal fails we want
out immediately. This is how
we protect our accounts.

We want our first entry to be

small. Then we add to our
winner on the continuation.
Entry and Stop on a Stock
reversing to the downside.
TRADE
WALK-THROUGH
We see in the previous
months we have buyer in
INO. Looking for
continuation of this.
June finally goes 2 up.
TRADE
WALK-THROUGH
I saw the outside week. I
caught the 2-2 reversal
up. I knew my magnitude
was the top of the
Scenario 3 (the outside
week).
TRADE
WALK-THROUGH
I saw the outside week. I
caught the 2-2 reversal
up. I knew my magnitude
was the top of the
Scenario 3 (the outside
week).
TRADE
WALK-THROUGH
On the 60 I actually got in
on the 2-2 reversal, with
only a few shares. I never
go stopped out.
TRADE
WALK-THROUGH
On the Daily you can
see where I got in at.
The next goes 2 up,
doesn’t stop me out.

Monday 22 Jun, INO

still good.
TRADE
WALK-THROUGH
On the Weekly

Monday 22 Jun, INO

still good! I added to my
position.
TRADE
WALK-THROUGH
INO where my trade
stopped.
Were my
trade
stopped
TRADE
WALK-THROUGH
INO where my trade
stopped.
Were my
trade
So what happened on stopped
the 24th? I held through
outside bar on the 60.
Why? Let’s look at the
5 min
TRADE
WALK-THROUGH
INO where my trade
stopped.
Were my
trade
So what happened on stopped
the 24th? I held through
outside bar on the 60.
Why? Let’s look at the
5 min
TRADE
WALK-THROUGH
INO where my trade
stopped.
Were my
trade
I already held through stopped
an outside bar. I’m not
doing it again. I take my
profits.
TRADE
WALK-THROUGH
INO what happened
next.
Were my
trade
25th could have got stopped
back in, but no clear
reversal back up.

26th CHOP SHOP!

I made a good decision.

TRADE
WALK-THROUGH
INO larger look at what
the trade looked like.
Were my
trade
Notice the next month stopped
opens as a scenario 1.
 INO now.

MOTHER Were my
trade
BAR stopped
PROBLEMS!
 IN SUMMARY
• Use the 3 universal truths to create winning positions,
add to them, and defend them with tight stops.

• Use a small initial entry. This keeps your losses small.

• Use progressive stops after the trade is working. This

will ensure you don’t give back your profits.

• Have a loss limit for the day. Should be a very small

amount. This will ensure you don’t give back your
profits from previous days, weeks, and months.