Disclaimer!⚠ I am not a license broker and I do not have a degree in finance or statistics. All of my information in this book comes from research and experience. I Makarios Aristotle Varner Jr., use these strategies to give myself a day and swing trading edge. I am not responsible for any risk you take trading options or long term investing using my strategies. I highly encourage non-experienced traders to NOT participate in option trading until they have educated themselves. All examples in this book are screenshots from my phone and are 100% authentic. I do NOT give any business or anyone permission to sell my investing guide or distribute it. This book is brought to you by Aristotle Investments💯 🧠 . Enjoy the read! Instagram:@Aristotle_Investments Invest📈, Grind&, and Think🧠! "Grind in your 20s🌱 , build in your 30s🌿 , chill in your 40s🌳 " Download the Robinhood 🌿 app using this code http:// share.robinhood.com/makariv to get a free stock 📲 ,(this is the app I prefer for long term, and swing trading) Download the Tastyworks 🤪 app using this code https:// start.tastyworks.com/#/login?referralCode=GNZE4RSRBM . This is the app I prefer to use for day trading options. RobinHood 🌿 is an app that made investing easy and affordable. The legendary tale of Robinhood 🏹 is about man who stole from the rich to give to the poor. That's exactly what Robinhood is doing! Changing the game 💯 💡 . 1. You trade commission free🤯 . That means they don't charge you per transaction. 2. No minimum deposit 💰 3. Easy to to use 🍼 4. Option trade for free 📊 (I'll explain option trading later in more depth) Tastyworks 🤪 is an app that is tailor made for trading options. I recommend only using a cash account with Tastyworks because you get unlimited day trades. When setting up your account, use a desktop or laptop to make depositing funds easier2 . 1. You can day trade options unlimited with cash accounts 3♻ 2. You can only trade with the amount of money you have that day. You have to wait until the next business day to trade with your profits. For example, If you have $1000 in cash today and you make $200, you cannot trade with that $1200 until the next day or you will be flagged. Four flags and they suspend your account for 90 days. 3. Commission is $1.50 for both calls and put options. You sell options free. This is the material I'm going to cover: 1. Basic stock market terminology 🤓 2. The best investing strategies for beginners 🌱 , mid level 🌿 , and high level🌳 that I recommend. 3. How to determine when a stock is going up 📈 or down 📉? 4. How to read candlesticks and candlestick patterns 🕯 5. How to analyze patterns in a graph to give you a day trading edge 📈 🤯 6. Option trading ♻ ( calls, puts, etc.) 7. How to use indicators 🔭 🔮 and understanding divergence ⚠ 8. Advanced strategies! (My "Golden Setup") 🍯 💰 9. My chat🗣 and what it offers! (Signals📡 , mentoring= , lessons📚 , sources, etc.) 10. My trading rules🧠 📲 💡 🆕 Bonus: Frequently asked questions! For example, what stocks do you recommend for starters? Where can I sign up to get notifications on which stocks to buy? #1 Basic Stock market terminology🤓🍼 Stocks are the capital raised by a business or corporation through the issue and subscription of shares. Shares are pieces of the company. Buying shares make you a shareholder. Ex. Look at Apple stock 🍎 👀 . 1 share of Apple= $221.62. I have 17 shares of Apple currently. But, I bought Apple back when they were $190 a share at the end of July 2018. $221 $190= $31. So that means I made $31 x 17 which equals = $527 since July B 2 . When you buy a stock at whatever price they sell it for, you make whatever money they make 📈 or lose what they lose 📉 . Ex. Let's say I buy that apple stock at $221.62... When their price increases to $225.62, I made $4 x the number of shares I have which is 17 ($4 x 17= $68). If their price decreases to $219.62, I lost $2 x 17 shares which equals $34. Apple 🍎 is a 🔵 blue chip stock- large Industry leading company. 🐃 Bull market- is when the stock market as a whole is in a prolonged period of increased stock prices 📈 (uptrend) and a 🐻 bear market is when the stock market is in a prolonged period of decreased prices 📉 (downward trend). Bulls- the buyers. This is referred to as a term that gives a name to the people who are pushing prices to go up. You'll also see the term bullish, which also means that prices are going up. Bears- the sellers. This is a name given to the people who are trying to push the prices down by selling their stocks. The term bearish means that the stock's price flow is in a down period. These terms come from a bear and a bull's style of attack F . Bulls strike up! 🐃 📈 Bears strike down! 🐻 📉 Bid- the maximum price that a buyer is willing to pay for a security. Ask- The ask price represents the minimum price that a seller is willing to receive. Spread- This is the difference between the bid and the ask prices of a stock. It can also be the amount for which someone is willing to buy it and the amount for which someone is willing to sell it. Trade is simply when you buy or sell a stock. A day trade is when you buy and sell a stock within the same trading day. In a trading day ☀ , premarket last from 9am to 9:30am ET. The stock market opens at 9:30am and closes at 4pm ET. After hours last until 8pm ET 🌙 but Robinhood allows you to trade until 6pm ET. A trading day is usually Monday-Friday. The stock market is closed on federal holidays (Christmas, Labor Day, etc.) Dividends💸 - A portion of a company’s earnings that is paid to shareholders, people that own that company’s stock, on a quarterly or annual basis. Not all companies pay dividends. Open 😀 - the opening price of that trading period. In most cases this is spoken in terms of the opening price of the day. Close😐 - the closing price of that trading period. It it usually associated with the closing price of the day. High😇 - the highest price of that trading period. This is usually associated with the highest price that a stock reached during a day. Low😔 - the lowest price of that trading period. This is usually associated with the lowest price that stock reaches during the day. Quote- Information on a stock’s latest trading price tells you its quote. This is sometimes delayed by 20 minutes unless you’re using an actual broker trading platform. Volume📊 - The number of shares of stock traded during a particular time period, normally measured in average daily trading volume. Yield🚥 - Often refers to the measure of the return on an investment that is received from the payment of a dividend. Portfolio 📜 -a collection of stocks bought by someone makes up their portfolio. Short selling⚓ - when a trader (you) closes their position after making profits (sell your stocks) and expects to buy the stock back for a cheaper price. It's like a cycle. ♻ You sell your position, wait for a dip, and then buy it back. Because RobinHood limits traders who's account balances are under $25k to 3 day trades per 5 trading days, you have to approach this strategy with caution 🚧 . I don't recommend this strategy for beginner investors. Hold your positions R (don't sell your stocks) until you have a clear understanding of market movement. Stocks can change direction at any moment and with your limited amount of day trades, you're at a disadvantage. Don't worry... I'll show you my strategies to combat this predicament 3 💯 . Example This is a marijuana stocks called Tilray. This is short selling on a smaller scale for simplicity's sake. I noticed Tilray was going down, so I sold 7 shares at $160.90. I bought those 7 shares back at $158. So here's what I saved: $160.90 x 7 (shares I sold) - $158 x 7 (shares I bought back) = $20.3. I saved $20... B 💰 I'll take it. Margin- when a broker loans you money to buy stocks. RobinHood 🌿 offers you this option through a subscription called "Robinhood Gold" 🔑 . Trading on margin can be dangerous 🚧 because if you’re inexperienced and make a bunch bad trades, you can lose all the money you borrowed, and you'll have to pay it back. You must often maintain a minimum balance in a margin account or you'll get a negative notice by your broker called a margin call if your account balance goes under the minimum⤵ . I bought $2000 worth of stocks with RobinHood gold subscription and I currently pay a monthly subscription of $10. I only recommend doing this once you know what you're doing. 💯 🧠 #2 The best investing strategies! 🌱🌿🌳 Beginners 🌱 As a beginner it is important to take baby steps 🐾 . Never dive into anything head first V . I recommend starting off with $250- $1000. Most beginner's biggest fear 😱 is losing money. It's to easy get discouraged 😥 and often times you'll be eager🤑 to hurry up and get on the level of the elite investors. On my 1st day of investing... I lost $150! ⏳ Patience is key in this game. When you first start off, know that you will not see gains overnight. In my opinion, it takes about a month for a portfolio to balance 📆 . I recommend starting with Robinhood app as a beginner. In the beginning stages, your focus should be on getting familiar with the stock market 📊 👀 . Google, YouTube, and asking experienced investors questions are all tools I still use today. They say there are 3 types of learners: visual 👁 , hands onR , and listeners] . Well in this game, you need to get out of your comfort zone 🐛 and try all 3🦋 . Watch videos, get familiar with buying and selling stocks, read news articles, READ BOOKS and take advantage of the conversations you have with experienced investors. The biggest mistake ALL beginner's make is buying stocks only because we 😍 "like" the company, or buying a random stock because it's cheap. Here are a list of stocks that I recommend buying for beginners: Canopy Growth, Cronos Group, Aurora Cannabis, Square Inc., Paypal Inc., Facebook, BIDU, General Motors, Microsoft, New Age Beverage, Match.com, Nike, Neptune Wellness, Disney, Apple, and MJ. Buy them on a dip (unless you're in a bear market)📉 . That means wait ⏳ until the price drops $2-$7 before you buy so you can make a profit when they go back up. These companies will set you up to get some decent gains in the beginning stages. While holding your positions in these stocks that I recommended, use that time to study📚 , research🔎 , watch YouTube📺 , subscribe to group chats📲 , etc. My thought process on buying a stock Click on a stock. Scroll down c until you see "stats"👀 . You want to buy them when they reach a price under "LOW" (most recent lowest price). This is canopy growth (CGC). I would buy them at $44 or lower. “OPEN" is the price of the stock when the market opened at 9:30am that day. "HIGH" is the stock's most recent high. "52 WEEK HIGH" (52 weeks in a year) is the stock's highest price that year (if a stock is anywhere near that... Be prepared for a dip). Never ever d buy a stock if the price is near "high, or 52 week high". You will be disappointed when the stock goes down and you lose money. Always e buy at the lowest price you can get. Intermediate 🌿 You've been investing for a few months, you are learning the ends and outs, and you've gained a little experience 2 & . You've got your feet wet 👣 💦 ! At this point and time you should have your top 5 stocks. At my intermediate level of investing, my favorite stocks were Canopy Growth, Cisco, Apple, Square, and WingStop. This was me, when I first started out. I was in the experimental stages of investing 🔬 🔭 . Portfolio diversification made it so I got decent returns. You want to diversify (invest in a number of different stocks) i j k l your portfolio so that you have a better chance of getting gains, and so that you can easily view which stocks you like the most. This was me 2 months after that. I was still practicing portfolio diversification. I made a few changes to my portfolio, added an additional $4000 💸 💸 of my own money, and the results paid offB . Keep reading📚 , learning🧠 , practicing and asking questions. High level 🌳 If you purchased this guide, chances are you're not here yet B , and there's a high chance that when you get here, you won't need this guide. At this point, you will want to get into option trading, swing trading, day trading, short selling, etc. I'll explain all of that later in this guide🤯 😂 . But here's what my prof olio looked like when everything I've been researching started to click 3 . As you can see, I switched my investing style up ♻ . I now only hold a few long term stocks and I use my additional money invested to do option trading (calls and puts chapter 7). This is the Tastyworks 🤪 app. This is the app I primarily use for day trading options. It allows me to quickly maneuver in and out of trades. All of those trades you see were option trades. I ended the day making $1,152. Not bad at all for 1 day of trading. 🤑 #3 Determining when stocks are going up 📈or down📉 Prices of stock change everyday by market forces 📈 📉 . This means that share prices change because of supply and demand. If more people want to buy a stock (demand) than sell it (supply), then the price moves up⤴ . On the other hand, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall ⤵. What makes a stock go up? 📈 🤔 Let me give you the real... Of course stocks will receive good news 📰 , they'll announce a positive rumor, have a great earrings report, etc. But what people don't understand is market movement. Sometimes people like you and I can make stocks go up by over-buying them🤤 💸 . When many people are buying more than they are selling it's called bullish volume🐂 📈 and the stock will go up. When buyer participation is high, stocks go up. Breaking of resistance lines also makes stocks shoot up 🚀 📈. Stocks tend to move in the category they're in. Large cap stocks tend to follow the movements of $SPY and $QQQ 👣 👣 (literally). Those 2 stocks are called ETFs, which stands for exchange traded funds. They are basically a stock that has shares of many other stocks🌳 🌳 🌳 . Both of these stocks top 5 biggest holdings are Apple 🍎 , Microsoft 💻 , Amazon 📦 , Google🔎 , and Berkshire Hathaway Bv . When $SPY and $QQQ are up, the majority of the market is up!📈 🚀 There are exceptions to this and I'll tell you why when I explain why stocks go down. There are "outsiders" as I like to call them. Outsiders 👺 👽 👻 are stocks that don't fall under the movement of $SPY and $QQQ. I still trade them z . But, it is easier to trade stocks that are going in a direction you are 95% sure where they're going or projected to go. When the market starts trading side ways you'll start to look for an alternative. Trust me B . Here is a short list of stocks owned mutually 👥 within $SPY and $QQQ: Apple, Amazon, google, Berkshire Hathaway B., Microsoft, Facebook, Exxon Mobil, Intel, AT&T, Bank of America, Proctor and gamble, Chevron CO, Visa, Coca Cola, Pepsi, Cisco, Home Depot, Disney, Boeing, etc. 🔎 Google, SPY and QQQ ETF holdings from zacks.com to view all of them. What makes a stock go down? 📉 🤔 Bad news😱 , bad rumors] , bad earnings reports🧾 , corrections📉 , breaking of support lines 📉 and profit taking 💸 all play a role into stocks going down. I will explain profit taking in more depth later on. A stock can literally be up, and out of no where you get a notification of bad news from a stock that you own. You go back to check on the stock and sure enough... It went downc . Remember! 95% of the market moves based on whatever $SPY, and $QQQ is doing. When these 2 are down, expect a *majority* of stocks to go down! The market as a whole will be downc 📉 . Earnings🧾📆 Every 4 quarters 🌱 🌿 🌳 🍃 companies have to do a earnings report and publicly 🗣 announce they're earnings per share, and revenue for the quarter. Most companies do this on the regular, mostly on a 3 month schedule, but companies do have the option to follow their own fiscal calendar. This time period is known as earnings season 🌱 🌿🌳🍃! Before earnings reports come out, stock analysts issue 👥 earnings estimates (an estimate of the number they think earnings will hit). These forecasts are then compiled by research firms into the "consensus earnings estimate". When a company beats this estimate, it's called an earnings surprise🥳 and the stock usually moves higher• . If a company releases earnings below these estimates, it is said to disappoint🤬 and the price typically moves lower. All of this makes it hard to try to guess how a stock will move during earnings season - it's really all about expectations 🤔 🧐 🤯 . Sometimes a company with a rocketing🚀 stock price might not be making much money, but the rising price means that investors are hoping that the company will be profitable in the future🛸 🔭 📈 . 💡 ƒ Theoretically, if they beat the expected number, the stock should go up. If they fail to meet the standard, the stock should go down but that's not always the case🤯 . From my experience, trying to guess the direction of a stock's movement after earnings is a gamble🎰 🎲 . Only buy a small position if you do decide to participate. You can do something called a straddle and set yourself up for a win-win situation (see options in chapter 6). A stock could beat their earnings per share, increase in profits, and still go down because of some lame bad news. For example, Apple beat their expected EPS😀 , increased their profits😀 , and still went down because they failed to sell enough iPads🤬 ... † . Yes... I lost money. A bad earnings report consist of many factors. Some companies do better during certain quarters of the year🌱 🌿 🌳 🍃 . Canadian Marijuana ‡ 🌿 stocks for example, were way overvalued during their first earnings report and didn't beat their expected EPS. They kept up-trending based on hype and optimism from marijuana being legalized federally in Canada October 17th, 2018. Volume 📊 Volume is the number of shares or contracts traded in a period. You use volume to measure the extent of trader participation📏 📐 🧮 . Volume tells you the number of shares or contracts traded, not the number of participants. When you see a price rising accompanied with volume rising, you're no longer imagining demand of a stock, but you can clearly see it! 📊 👀 Volume is the easiest and the most powerful indicator to tell you the movement of a stock 📈📉. Volume can be measured as an indicator known as “On Balance Volume” (OBV) or “Chaplin Money Flow”. Or, you simply by analyzing volume levels. I use OBV and analyzing volume levels. Example This is the app called TRADINGVIEW. I'm using the dark theme🌚 . The volume is represented by the green and red bars you see at the bottom of the graph. Green bars mean there is high participation in buying (bullish volume)• . Red bars mean there is a high participation in selling (bearish volume)c . This is $SPY stock. When the stock prices go up, notice bullish volume rises as well. When it goes down, notice bearish volume rises. Volume plays a big role into noticing breakouts or determining patterns. You'll see what I mean later on. 2 💯 Volume spike 📊 is when a volume number is double or more the size of volume on the proceedings days 🌿 🌳 . Say volume has been running at 100,000 shares per day for several days or weeks and suddenly it explodes to 500,000 shares. If the price had been in a downtrend, this wild increase in volume means that the crowd is throwing in the towel and exiting/selling their position Œ • 💨 . This pretty much means you'll see a spike in red bars, a.k.a. bearish volume📉 . A breakdown in a support line, bad news, or bad earnings more than likely took place. The same thing applies when a stock is on an uptrend and bullish volume rises📈 . Be prepared to take profits. This means that traders have used up all their cash and are about to sell off the stock meaning a downtrend is on its way. Always keep an eye on volume. So if you see a spike in green bars, you’re about to engage in profit taking 💸 . Some people believe that they can predict the movement of stocks. Others believe that they can draw lines • and use 📊 📐 ⬆ ⬇ ➡ ⬅ ↗ ↘ patterns based on the past movement of stocks. This is the method I currently use and is the most accurate. #4 Candlesticks 🕯 Candlesticks provide traders with a visual representation of the emotions/status of the market during a trading period. A trading period can be 1 min, 5 min, 15 min, 30 min, 1 hour, etc. Candles show you the true 💯 2 price action of a stock and they confirm volume, buying pressure, and selling pressure. Bullish Candle 🐂 A bullish candle says that within that predetermined time period, (whether it was 1 min, 5 min, 15 min, 30 min, 1 hour, 1 day, etc.), the buyers took control for most of it. To be a GREEN candle, the close (the closing price of that trading period) within that trading period has to be higher ⬆ than the open (the opening price of that trading period). The difference between the close and open is called the body🚹 . The lines above the close and open are called shadows. The high • represents the highest price of that trading period. The low c represents the lowest price of that trading period. Bearish Candle 🐻 A bearish candle says that within that predetermined time period, (whether it was 1 min, 5 min, 15 min, 30 min, 1 hour etc.), the sellers z took control. To be a RED candle, the close within that trading period was lower ⬇ than the open. Long VS Short Bodies 🐍 🐛 Generally speaking, the longer the body is, the more intense the buying or selling pressure🚀 . Conversely, short candlesticks indicate little price movement and represent consolidation🚁 . Long green candles show strong buying pressure. The longer the green candle is, the further the close is above the open • . This shows the prices advanced significantly and buyers were aggressive. Long green candles🔋 can mark as potential support levels after a long decline. ✅ Short green candles with short bodies show that buying pressure is decreasing🍃 . This also shows that buying barely rose above the open of that period. The Bulls 🐂 won a short victory over the Bears. Depending on what position the short candle is in (star, or bearish harami), it could signal a bearish reversal.🌪 Long red candles🛢 show strong selling pressure. The longer the red candle is, the further the close is below the openc . This tells you that prices declined significantly from the open and the sellers were very aggressiveF . After a long advance, a long red candle can foreshadow a turning point or mark as a future resistance level☁ . Short red candles show low selling pressure and the prices dropping just a little under the opening price. Short red candles can signal selling pressure is starting to diminish, and they can signal a bearish 🐻 reversal depending on their position (morning star or bearish harami). Different types of candles 🕯 Marubozu🔋 🛢 Marubozu brothers are very potent examples of candlesticks. 👥 They do not have upper or lower shadows. A Green Marubozu 🔋 forms when the open is equal to the low and close is equal to the high. This indicates that the buyer controlled the price action from the first to last trade🥇 🎊 . Vice verse with the Red Marubozu 🛢 , the open equals the high and the close equals the low. This indicates that sellers controlled the price action from the first to last trade. Long VS Short Shadows 🐍 🐛 Candle sticks with long upper shadows and short lower shadows indicate that buyers dominated the session and took the prices higher. But sellers later forced the prices down from higher highs, and the weak close created a long upper shadow🛑 . Conversely, candlesticks with long lower shadows✅ and short upper shadows indicate that sellers dominated during the session and drove prices lower. However, buyers later made a comeback • 💨 to increase bid prices by the end of the session and the strong close created a long lower shadow. Spinning Tops 🌪 ✅ 🛑 Candlesticks with a long upper shadow, long lower shadow, and small real body are called spinning tops🌪 ✅ 🛑 . One long shadow represents a reversal of sorts; spinning tops represent indecision. The small real body shows little movement from open to close, and the shadows indicate that both bulls 🐂 and bears 🐻 were active during the session. Even though the session opened and closed with little change, prices moved significantly higher and lower in the meantime. Neither buyers nor sellers could gain the upper hand and the result was a standoff⚔ . After a long advance or long green candlestick, a spinning top indicates weakness among the bulls🐂 and a potential change or interruption in trend. After a long decline or long red candlestick, a spinning top indicates weakness among the bears 🐻 and a potential change or interruption in trend. Doji✝ ☯ Dojis are very important candles that provide information of their own and are key 🔑 components in a number of important patterns. Dojis form when stocks open and close are virtually equal☯ . The length of the shadows can vary and the resulting candlestick can look like a cross ✝ , inverted cross, or plus sign ➕ . Alone, dojis are neutral patterns. Any bullish🐂 or bearish🐻 bias all depends on a preceding price action for confirmation. Dojis convey a sense of indecision🤔 or tug of war between buyers and sellers. Prices move above and below the opening level. The result is a standoff⚔ . Neither bulls nor bears were able to gain control during that time period and a turning 🔃 point could be developing. Long Green and Red candles + Doji 🔋🛢 ➕ After an advance 📈 or long green 🔋 candlestick, a Doji ✝ could signal that buying pressure is diminishing and an uptrend could be nearing an end📉 . Further confirmation is require though. A gap down or a long bearish red candle 🛢 can signal that the Doji✝ was a good confirmation of an end to a down trend. After a decline or long red candle stick, a Doji could indicate that selling pressure may be diminishing and the downtrend could be nearing an end🔚 . Further confirmation is needed for the Doji to successfully signal an uptrend. A gap up or long bullish green candle 🔋 could indicate a trend reversal🔃 . Long-Legged Doji § Long-legged doji have long upper and lower shadows that are almost equal in length. This reflects a great amount of indecision🤔 in the market. Long-legged dojis indicate that prices traded well above⤴ and below⤵ the session's opening level, but closed virtually even with the open. After a whole lot of 🗣 yelling and 🗣 screaming, the end result showed little change from the initial open. Dragonfly Doji 🐉 🐲 form when the open, high and close are equal and the low creates a long lower shadow. The resulting candlestick looks like a “T” with a long lower shadow and no upper shadow. Dragonfly dojis 🐲 🐉 indicate that sellers dominated trading and drove prices lower during the session. By the end of the session, buyers resurfaced and pushed prices back to the opening level🚀 📈 and the session high. The reversal aspect🔃 of a dragonfly doji🐉 all depends on the previous price movement. After a long downtrend📉 , long red candlestick🛢 , or at support, a dragonfly doji could signal a potential bullish reversal or bottom. After a long uptrend, 🔋 long green candlestick or at resistance🔝 , the long lower shadow could foreshadow a potential bearish reversal or top. Bearish or bullish confirmation is required for both situations. Gravestone Doji⚰ form when the open, low and close are equal and the high creates a long upper shadow. The resulting candlestick looks like an upside down “T” with a long upper shadow and no lower shadow. Gravestone⚰ doji indicates that buyers dominated trading and drove prices higher during the session. However, by the end of the session, sellers resurfaced🧟 and pushed prices back down to the opening level and the session low.⤵ Bullish Reversal Dojis and Patterns🐂📈🔃 Long-legged Dojis § after a long red candle can be a sign of a bullish reversal after a downtrend. A long green bullish candle right after the long-legged doji with increased volume should be used as confirmation. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr for day trading. 1 day for trend prediction. Abandoned Baby Bottom (top) 🏃💨👼 A rare 💎 three- day rare reversal pattern characterized by a gap down⤵ followed by a Doji✝ , which is then followed by another gap in the opposite direction. The shadows on the Doji must completely gap below the shadows of the first and third candle stick for bullish confirmation. That means the shadows or bodies do NOT overlap. Duration: 3 days Hammer🔨 This candlestick forms when prices for that period moves significantly lower after the open, but rallies to close well above the period's low. If a hammer is present after a downtrend📉 , be on the lookout for a up-trending reversal📈 🔃. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr for day trading. 1 day for trend prediction. Inverted Hammer 🙃🔨 In a downtrend📉 , the opening price is lower, then it trades higher, but closes near its open. Therefore, it begins looking like an inverted lollipop. If spotted during a downtrend📉 , be on the lookout for an uptrend 📈 with rising volume📊 and more bullish green 🔋 🔋 candles to follow. Given that long shadow above the close, it signifies that buying pressure took place. That's a red flag ⛳ that bullish reversal may take place. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr for day trading. 1 day for trend prediction. Morning Star ⭐ This is a three day candle stick pattern that signals a bullish reversal. It has a long-bodied🛢 red candlestick extending the current downtrend📉 , a short middle candle that gapped down⤵ on the open, and a long bodied green 🔋 candle that gapped up ⤴ on the open and the close above the midpoint of the body of the first day. Duration: 3 days Morning Star doji ⭐ ✝ A three-day bullish 🐂 📈 🔃 reversal pattern that is very similar to the Morning Star. The first day is in a downtrend with a long red body. The next day opens lower with a Doji that has a small trading range. The last day closes above the midpoint of the first day. Duration: 1 min, 5 mins, 15 mins,30 mins, 1hr for day trading. 3 days for trend prediction. Bullish kicker🐂🥾💥 This is a two-day patten. The first candle needs to be a red 🛢 or bearish candlestick. The second candle (which is green 🔋 or bullish) must open above⤴ the close of the first candle, forming a gap⤴ . Third, the movement of the price during the formation of the second candlestick should never drop into the gap formed between the first and second candle. As you might have guessed, this means that there is rarely a bottom wick on the second candlestick. Duration: 2 days Bullish Engulfing 😋🍽 This is a bullish reversal pattern so a previous downtrend 📉 should be present. It's a two-day patten. The first candle is a small red body, followed by a longer candle that completely engulfs 🔋 the smaller body. It does not require the entire range (high and low) to be engulfed, just the open and close. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr for day trading. 2 days for trend prediction. Bullish Harami ¸ A two-day candle pattern that has a small body candle completely contained within the range of the previous body, and is the opposite color🛑 ✅ . It looks the complete opposite of the engulfing but both are bullish. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr for day trading. 2 days for trend prediction. Piercing Line 〽 A bullish two-day reversal pattern. The first day, in a downtrend, is a long red candle🛢 . The next candle opens at a new low⤵ , then closes above⤴ 📈 the midpoint of the body of the first day. To qualify as a bullish reversal, the candle must close above the midpoint. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr, 2 days Tweezers Bottom🥢 To identify this bullish signal, look for this (very easy) criteria: First, there must be two or more adjacent candles of either🔋 🛢 color. Second, a clear downtrend 📉 should be present. Third, those candles must reach the same low point. Having the same low point is the most important factor to identify a tweezer bottom for a bullish reversal🐂 📈 🔃 . Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr, 2 days Three white (or green) soldiers 👮 👮 👮 There are three things that need to happen for a three white soldier pattern: First, there must be three long and bullish green candlesticks in a row 🔋 🔋 🔋 . Second, each of those candles must open above the previous day’s/period’s open. Ideally, it will open in the middle price range of the previous day. Third, each candle must open progressively upward⤴ ⤴ ⤴ , establishing a new short-term high. Fourth and finally, it is important that the candles have very small (or nonexistent) upper wicks. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr, 3 days Three Line Strike (Bullish) Despite the name, this pattern actually contains 4 candles. 🛢 Red candle must appear on the first day and another candle on second day 🛢 closing lower than the previous day. Again, a third 🛢 red candle will appear on the third day, closing lower than the previous day. Those three escalating red candles should be followed by a green candle🔋 , which opens lower than the previous candles but then rises up, closing above the first candle’s opening price. In the end, this fourth candle should contain the real bodies of the three previous candles within its length. Duration: 4 days Bearish Reversal Dojis and Patterns🐻📉🛢 Evening Star ⭐ This is a 3-day pattern. The first day must be represented in a long green body🔋 to continue the uptrend. Secondly, the second day must represent indecision🤔 through a Star candle formation or a Doji, relaying that supply and demand is fairly equal⚖ . Last but not least, the third day must have a long red body🛢 that closes down at least halfway into the body of the first day’s green candle, proving that the bears 🐻 have stepped in strongly and gained control. Duration: 3 days Evening Star Doji 🌟 A three-day bearish🐻 📉 reversal pattern is similar to the Evening Star. The uptrend continues with a large green body 🔋 . The next day opens higher⤴ , trades in a small range, then closes near its open (Doji)✝ . The next day closes below 🛢 ⤵ the midpoint of the body of the first day. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr for day trading. 3 days for trend prediction. Shooting Star 🌠 A single-day pattern that can appear in an uptrend. It opens higher, trades much higher, then closes near its open. It looks just like the Inverted Hammer except that it is bearish. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr for day trading. 1 day for trend prediction. Abandoned Baby Top 🏃💨👶 This is a 3-day patten. First, there must be a large green candlestick in an uptrend🔋 📈 . Second, the green candle must be followed by a doji (either color) that gaps above the close of the first candle. The last candle in the trio must be red 🛢 and open below ⤵ the doji. It is very important that there are gaps between the first and second candles as well as the second and third candles. There should NOT be overlapping between neighboring candles. Duration: 3 days Hanging Man 🕴 Hanging Man candlesticks form when a stock moves significantly lower after the open, but rallies to close well above the low. The resulting candlestick looks like a square lollipop 🍭 with a long stick. If this candlestick forms during an advance, then it is called a Hanging Man. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr for day trading. 1 day trend prediction. Bearish Kicker🐻🥾💥 First, there must be a green bullish candlestick 🔋 . Second, the green candlestick must be followed by a red (bearish) candlestick that opens below the first candlestick, forming a gap. Third, the price during the formation of the second candlestick must never rise into the gap. Due to this stipulation, you will rarely find a top wick on the second candlestick. Duration: 2 days for trend prediction. Bearish Engulfing 🐻🍽 This is a bearish reversal pattern so a previous uptrend should be present. It's a two-day patten. The first candle is a small green body, followed by a longer red candle🛢 that completely engulfs the smaller body. It does not require the entire range (high and low) to be engulfed, just the open and close. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr for day trading. 2 days for trend prediction. Bearish Harami 🐻¸ This is a two-day or day trading candlestick pattern. There should be a long green 🔋 candle on the first day and small red candle completely contained within the green candle. Harami patterns have the longer candle on the left side and the smaller candle on the right as opposed to the engulfing patterns. The smaller red candle marks the end of a uptrend. Buying pressure has diminished. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr for day trading. 2 days for trend predictions. Dark Cloud Cover⛈ This patten is made up of 2 candles. Both candlesticks should have fairly large bodies and the shadows are usually small or nonexistent, though not necessarily. The red candlestick must open above🛢 the previous close and close below⤵ the midpoint of the green candlestick's body to qualify as a reversal. Just as the bearish engulfing pattern, residual buying pressure forces prices higher ⤴ on the open, creating an opening gap above the white candlestick's body. However, sellers step in after the strong open and push prices lower⤵ . Duration: 2 days Tweezer Top To identify this bearish candlestick pattern, you’ll need to spot the following criteria: First, there must be two or more adjacent candles of either color. Second, a clear uptrend should be present. Third, those candles must reach the same high point. Having the same high point is the most important factor to identify a tweezer bottom for a bearish reversal. Duration: 1 min, 5 mins, 15 mins, 30 mins, 1hr for day trading. 2 days for trend predictions. Evening star ⭐ First, the price must be in an unmistakable uptrend📈 (bulls in control) before the signal can occur. Second, the first day must be represented in a long green body🔋 to continue the uptrend. Third, the second day must represent indecision through a Star candle formation or a Doji✝ , relaying that supply and demand is fairly equal. Fourth and finally, the third day must be illustrated with a long red body🛢 that closes down ⤵ at least halfway into the body of the first day’s green candle, proving that the bears have stepped in strongly and gained control. Duration: 3 days Three Black crows 🦅🦅🦅 First, there should be a prevailing uptrend📈 in progress. Second, there must be three long and bearish red candlesticks🛢 🛢 🛢 in a row. Third, each of those candles must open below the previous day’s open. Ideally, it will open in the middle price range of the previous day. Fourth, each candle must close progressively downward⤵ ⤵ ⤵ , establishing a new short-term low. Lastly, it is important that the candles have very small (or nonexistent) lower wicks. Three line strike (Bearish) ⚾⚾⚾ First, an uptrend must be in progress. Second, a green candle 🔋 must appear on the first day. Third, another green candle must appear on the second day🔋 , closing higher than the previous day. Fourth, a third green candle must appear on the third day🔋 , again closing higher than the previous day’s close. These candles continue the established uptrend 📈 . Fifth, those three escalating green candles should be followed by a LONG red candle🛢 , which opens higher⤴ than the previous candles but then dips down, closing below ⤵ the first candle’s opening price. In the end, this fourth candle should contain the real bodies of the three previous candles within its length. Duration: 4 days How to use candlestick patterns To start... You need to download this app called TradingView. This is the app I use to draw patterns and analyze stocks. I like to use it on my iPad or laptop as well. Most of us have jobs or are on the go so I'm going to cater to this crowd primarily. Second, you want to make sure your graph is set to "candles" by tapping the icon circled above. Third, you want to change your pattern time frame to 1 day on the TradingView app by simply taping/clicking whatever time frame is present, and scrolling down until you see "1 day". Examples of candlestick patterns used on a daily chart I use candlesticks for volume confirmation during breakouts and to further my hypothesis of the next day's price action. Do NOT get too caught up in trying to trade based on candlestick patterns. Price movement is never 100% predictable. No patten or indicators is ever 100% right. You always need further confirmation before executing a pattern. I switch from the 5min and 15min chart during the day to give me a clear idea of the emotions of the market in live action. #5 Analyzing patterns in a graph📊📈📉 I'm going to cover my top patterns that I use to gain a trading edge and make a lot of money. There are plenty of patterns but any investor will tell you that they have favorites. I'm showing you my favorites! First- you need to understand basic lines. You will see me mentioning some of these lines throughout this chapter. Hopefully, no one forgot these 😂 👀 . Second - you need to understand your support and resistance lines. "Resistance" is a series of highs and "support" is a series of lows. Resistance is your ceiling ⤴ and support⤵ is your floor. Imagine a bouncy ball 🏀 . If you throw a bouncy ball at the ceiling, it'll come right back down⤴ ⤵ . If you throw it at the floor, it'll bounce up from the floor⤵ ⤴ . That's how you need to imagine 💭 drawing your support and resistance lines, viewing how prices bounce. If it bounces down from that line, it is resistance • . If it bounces up from that line, it's support c . To make things simple for you, I made support lines red ⛔ and resistance lines green✅ . You'll keep seeing me repeat throughout this chapter "I saw it break the line of support so I decided to do a PUT optionÈ 💰 " or "I saw it break the line of resistance so I decided to do a CALL optionz 💰 " . Breaking the line of resistance or line of support is called a breakout. When the price breaks an accurately drawn green line of resistance ✅ , the price of the stock moves up⤴ . When a stock breaks an accurately drawn line of support ⛔ , the price of the stock will move down ⤵ . The best way I can explain locating a line of support or resistance is by observing a pattern of prices touching an imaginary line multiple times. You'll quickly be able to recognize them forming horizontally ➡ and diagonally ↘ ↗ . Let's practice one really quick. What do you see? In the famous words of my homie Spongebob: "use your imagination🌈 ". Can you spot a triangle 🔺 ? In the top left corner you see the name of the stock "MDT", which is the symbol for MedTronic. What do I see? I see a bullish symmetrical triangle pattern 🔺 forming and a breakout🚀 . I drew a red line of support and a green line of resistance✅ . The prices shot past the green line of resistance. If the the triangle is drawn correctly, you'll see a jump in prices 9/10 times. At the ending stages of your triangle, it is called the consolidation period. This is when volume (trading participation) is low. After every period of consolidation, a breakout will take place🚀 . You just have to know when, where, how, and why! Next, I will be using the "line" feature to give you a better visual 👁 representation of a pattern. It is important to still use the candlestick feature when analyzing a chart. Candlesticks 🕯 are best used for price action and viewing EXACT highs⤴ , lows⤵ , closing🔚 , and opening prices. You can see more of the flow of prices using lines but sometimes they don’t provide you with exact highs and lows. They simply make patterns more appealing to the eye👁 2 . Now let's jump right into these patterns! Ascending triangle ↗🐂📈 This triangle usually appears during an upward trend and is regarded as a continuation pattern. It is a 🐃 📈 bullish pattern. Sometimes it can be created as part of a reversal at the end of a downward trend, but more commonly it is a continuation. Ascending triangles are always bullish patterns whenever they occur. Prior trend🔙 : Could be an advance, or a downtrend. The important matter is the pattern. Top Horizontal Line: At least 2 or more touches (a.k.a. reaction highs, meaning every time it gets to this high price, it reacts to drop down in price) of your ➡ horizontal resistance line is needed to draw your pattern. You should be able to connect these highs forming a horizontally straight line across the top. The highs do not have to be exact, but they should be within reasonable proximity of each other. Lower Ascending Trend Line: At least 2 touches (reaction lows) of your lower ascending trend line is needed. Your ascending trend line should ALWAYS go diagonally in this direction ↗ . These reaction lows should be successively higher, and there should be some distance between the lows. Duration📅 : 1-3 weeks 1-3 months for ascending triangle. Volume📊 : Increased volume is preferred during the breakout but volume doesn't really matter with this pattern. The breakout is what's important. Breakout🚀 : Breaking the horizontal line of resistance is key. Don't make a move until it broke out at least 2-3%. Target/exiting point🎯 : You should sell and take profits by measuring from your first touch of your support line, to the resistance line. Take that same measurement and apply it to estimate how far your stock will go. Mark your exiting point in your notes or use alerts. I use Pivot points, candlestick patterns, or I simply take profits at a comfortable gain to determine my exiting strategy. Example: This is UPS. They are the famous mail delivery company. They formed an ascending triangle. • Horizontal line of resistance across the top and diagonal line of support converging into a triangle shape✅ • Atleast 2 or more touches of support and resistance lines ✅ • A breakout of the resistance line ✅ • Increased volume during breakout✅ My reaction to this: Once I saw a break in resistance line, I quickly did a call option! I profited $212. Descending Triangle ↘🐻📉 The Descending Triangle is another continuation pattern, but this triangle is a 🐻 📉 bearish pattern and is usually created as a continuation during a downward trend. Occasionally it can be seen as a reversal during an upward trend (the opposite of the ascending triangle pattern), but it is considered to be a continuation. To qualify, there must be a breakdown of the support line. Prior Trend🔙 : It could be both a up or down trend. The pattern is what's most important. Lower Horizontal Line: At least 2 touches (a.k.a. reaction lows meaning every time it gets to this area of ⤵ low prices, it reacts to go ⤴ upward in price) are required to form the lower horizontal line. The lows do not have to be exact, but should be within reasonable proximity of each other. There should be some distance separating the lows and a reaction high between them. Upper Descending Trend Line: At least 2 or more touches (reaction highs) are required to form the upper ↘ descending trend line. These reaction highs should be successively lower and there should be some distance between the highs. If a more recent reaction high is equal to or greater than the previous reaction high, then the descending triangle is not valid. This means that the prices should go down diagonally like this ↘ to form a triangle. Duration📅 : 1-3 weeks or 1-3 months for descending triangles. Breakout🚀 : Must break the support line to confirm a breakout. Wait for a breakdown of at least 2-3% for confirmation. Target/Exiting Point🎯 : You get your exiting point from measuring the distance from the peak of your first reaction high of your resistance line, to the support line. Take that measurement and use it as an estimate to exit the breakout's advance. I always exit a little before the estimated target. I use Pivot points, candlestick patterns, or I simply take profits at a comfortable gain to determine my exiting strategy. Example: This is Adobe stock. I'm sure you're familiar with the company. Horizontal support line, and the diagonal resistance line • slopes downward converging into a triangle✅ • At least 2 touches of support and resistance lines ✅ • Breakdown of the support line ✅ I didn't get a chance to do a put option here. But it did bounce back after the breakdown and I did a call option there. I'll show you later in this chapter when I explain my trend-line rule. Pennant 🐂🐻📈📉 A Pennant is created when there is a significant movement in the stock, followed by a period of consolidation (steady movement within a limited price range). There aren’t much trading opportunities during this period, which creates the pennant shape due to the converging lines ">". A breakout movement then occurs in the same direction as the big stock move. It can also breakdown past the support line, especially during a downward trend. This pattern will be your bread and butter because it occurs frequently. If the prior trend is advancing, it has to breakout in a uptrend in order to be considered a pennant. These are also similar to flag patterns because they last between one and four weeks. Consider this pattern to be a pause in movement before a breakout. Prior trend🔙 : There has to be upturning sharp movement that usually contains gaps. The advance should only be 1-3 weeks old. Trend-lines: 2 or more reactions highs touching the resistance and 2 or more reactions lows touching the support line. Duration📅 : 1-3 weeks. Anything past that should be considered a symmetrical triangle. Volume📊 : There will be significant volume at the initial stock movement, followed by weaker volume in the pennant section, and growth in volume at the breakout. ⚠ Warning: Wait for the breakout to occur. Never try to guess the direction of the breakout because it could go either way depending on which line it breaks. Wait for the breakout to go up at least 2-3% before making a move. Target/exiting point🎯 : Measure from the peak of your first touch of the resistance line to your support line. Use that measurement to estimate when you should exit. I use Pivot points, candlestick patterns, or I simply take profits at a comfortable gain to determine my exiting strategy. Example: This is FedEx stock that formed a pennant pattern. • Prior trend lasting a couple of weeks✅ • 2-3 touches of the support and resistance lines✅ • Duration of at-least 1-4 weeks ✅ • Bullish volume with the breakout ✅ My Reaction: I executed a call option and profited $178 with a 57% gain. I'll take it! 3 💰 Bullish Symmetric Triangles 🐂📈 The symmetrical triangle pattern is easy to spot thanks to the distinctive shape, which is developed by the two trend-lines that converge. This pattern looks similar to a pennant. The only difference is the time frame between them. Symmetrical triangles typically last between 1-3 months and pennants 1-3 weeks. This is a pattern you have to watch closely because it can either be a reversal or a continuation. But in this case, it's a bullish pennant. For example, if it's in an uptrend and breaks the line of resistance, it is a continuation. But if it breaks the line of support, it is a reversal. By now you should know that breaking the line of resistance means bullish, and breaking the line of support means bearish. Prior trend🔙 : While there are some instances where they're marked as reversals, more often they are continuation patterns. Regardless, the trend should be a few months old. Trend-lines: 2 or more reaction highs touching the resistance and 2 or more reaction lows touching the support line. Duration📅 : The symmetrical triangle can extend for a few weeks or many months. If the pattern is less than 3 weeks, it is usually considered a pennant. Typically, the time duration is about 1-3 months. Volume📊 : As the symmetrical triangle extends and the trading range contracts, volume should start to diminish. This is referred to the quiet before the storm, or tightening consolidation before a breakout. Target/Exciting Point🎯 : Measure from the first touch of your support line to the to your resistance line. Take that measurement and estimate when you should exit. I use Pivot points, candlestick patterns, or I simply take profits at a comfortable gain to determine my exiting strategy. ⚠ Warning: Never try to guess the direction of a breakout. Wait for confirmation of break in a support or resistance line. In this case of a bullish symmetrical triangle, you want to wait for a break in the resistance line. Example: This is Moodys Co. and I quickly spotted a symmetrical triangle. • • In this case the pattern became a reversal instead of a continuation and went through a retracement period. (A retracement is a temporary reversal in the direction of a stock's price that goes against the prevailing trend). ✅ 2 or more touches of the support and resistance lines. ✅ • 1-3 month pattern. ✅ • Breakout of the resistance line ✅ My reaction to this: I did a call option and made a $260 profit with a 72% gain once I spotted that it broke the green resistance line. Bearish symmetrical triangle 📉🐻 This pattern will look exactly like a bullish symmetrical triangle except the breakout will be in a downtrend. This time, it will break the support line. This is where you do a PUT option so that you can make money while the stock goes down. You should also sell your position to avoid losing money. The duration is the exact same: 1-3 months. During a breakout, you will see bearish volume aka a sell off. Either bad news took place, a correction in price, or people are taking profits. Target/exiting point🎯 : Measure from the first touch of your support line to the resistance line. Use those same measurements to estimate an exiting point. I use Pivot points, candlestick patterns, or I simply take profits at a comfortable gain to determine my exiting strategy. Example: This is Conocophillips stock. Prior trend a downtrend so it qualifies as a continuation. • ✅ 2 or more touches of the support and resistance lines • ✅ • 1-3 month pattern ✅ • Breakdown of the support line✅ I did not get a chance to do a put option on this stock but at least you get to see an example. Flag Continuation ⛳🏁🐂📈 The Flag Continuation pattern forms through Rectangular/parallel lines that developed as a pullback from an uptrend. The rectangle develops from two trend-lines which form the support and resistance until the price breaks out. The flag will have sloping trend-lines ↘ ↘ , and the slope should move in the opposite direction↗ ↘ to the original price movement. Once the price breaks the resistance or support line, this creates the buy/call option or sell/put option signal. Prior trend🔙 : Significant moment in a up trend. It usually contains gaps and heavy volume. Trend lines: 2 or more reactions highs touching the resistance and 2 or more reactions lows touching the support line. Duration📅 : This is also a short term pattern lasting 1-4 weeks. Target/exiting point🎯 : The length of the flagpole can be applied to the resistance break or support break of the flag to estimate the advance or decline. I use Pivot points, candlestick patterns, or I simply take profits to determine my exiting strategy. Example: This is Berkshire Hathaway B stock owned by Warren Buffet, the most famous investor of all time. This stock formed a flag continuation pattern that I quickly caught. • Prior trend gaps with heavy volume ✅ Flag pattern formed (pullback/consolidation period) • after significant movement ✅ 2 or touches for both the support and resistance lines. • ✅ Breakout of the resistance line to confirm the flag • continuation pattern ✅ My reaction 🤑 : I quickly executed a call option and profited $183 with a 98% gain once I saw it break the green resistance line. Price Channels 🧬🐂📈 Price Channels are used when a stock is trading within a specific range of prices that either slope upward, downward, or horizontally. The upper trend line marks as resistance and the lower trend line marks as support. A bullish price channel refers to a channel with a positive slope. A bearish price channel refers to a stock with a negative slope, and horizontal price channel refers to a channel that is trading sides ways horizontally. Each channel ends with either a breakout of support or resistance lines. Trend lines: To qualify as a channel there should be at least 2 or more touches of both support and resistance lines. Duration📅 : Hours, days, weeks, or months. As long a prices trade within a certain range, it qualifies as a channel. I use them for day trading often. Example: SPY marked as a horizontal price channel. • 2 or more touches of support and resistance lines ✅ • Prices trading in a range horizontally ✅ Example: I was able to catch a few of the peaks and troughs with this horizontal price channel and made a lot of money doing so. Here's an example of me buying a Put on SPY. I knew that it was trading within a channel. Once SPY reached resistance, I knew it would bounce down from it if it didn't breakout. Rounding Bottom 🥣🐂📈 This is a longterm bullish reversal pattern. This is sometimes referred to a “saucer bottom”. Decline📉 : The first portion of the rounding bottom will be the low of the pattern. This decline can take on many forms. Some are quite jagged with a number of reaction highs and lows, while others trade lower in a more linear fashion. Low⤵ : The low of the rounding bottom can look like a "V" shape but should not be too sharp and only take a few weeks to form. Advance📈 : The advance from the low should take about the same amount of time as the prior decline. If the advance is too sharp, you should question the validity of the pattern. Breakout🚀 : The pattern is confirmed when the pattern breaks above the previous reaction high that marked the beginning of the decline at the start of the pattern. There should be increased bullish volume on the breakout. Duration📅 : Typically from a few weeks to 1-6 months. Examples: This Abbvie, a big pharmaceutical company and they formed a rounding bottom. • Down trend with a reaction high ✅ • Cup formed ✅ • Duration of pattern lasting a few weeks✅ • Break of green resistance line ✅ My reaction to this: I did a call option after I noticed a break of resistance and only profited $54. The point is that I successfully executed the pattern. Falling Wedge 🐂📈 The Falling Wedge patten is a bullish continuation pattern. It has a prior uptrend and falls for a few months until a breakout happens, which will continue the uptrend. It will begin wide at the top and contracts as prices move lower. This price action forms a cone shape as reaction highs and lows converge. The falling wedge is strictly bullish. Prior trend🔙 : It should have a prior uptrend that forms over 3-6 months, and the down trend should be at least 3 months old. Trend lines: At least 2 reaction highs (ideally 3) need to touch the upper resistance line and at least 2 reaction lows need to touch the lower support line. Duration📅 : The pattern usually forms over a 3-6 month period and the preceding downtrend should be at least 3 months old. Volume📊 : Volume is only important during the breakout. Rising volume will confirm the breakout. Example: This is Aurora Cannabis! • Prior uptrend that formed over 3-6 months. ✅ 2 or more touches of the support and resistance lines • ✅ • • The wedge patten lasting at least 3 months ✅ Breakout of the resistance line with bullish green volume to match✅ My reaction to this! I profited $405! I'll take it! Cup and Handle☕🐂📈 The Cup with Handle pattern is a bullish continuation pattern that marks a consolidation trading period followed by a breakout. The cup forms after an advance (uptrend) and looks like a rounding bottom. As the cup is completed, a trading range starts to develop on the right-hand side and the handle is formed. If a breakout happens after the handle, you have confirmation of the pattern. Prior trend🔙 : There should be an trend prior to the cup formation. The trend should be a few months old and not too mature. The more mature the trend, the less likely it'll mark as a continuation. Cup☕ : The cup should be U-shaped, resemble a bowl, or rounding bottom. A V-shape is sharp of a reversal to qualify. The up will appear jagged at the bottom of the cup. The cup should be a few months long. The perfect cup should have equal highs on both sides of the cup but that's not always the case. Handle: After the high forms on the right side of the cup, there will be a pullback that creates the handle. This pullback will resemble a flag pattern. This is the final consolidation before the BIG breakout. The smaller the retracement, the more bullish the formation and significant the breakout. Volume📊 : there should be a significant increase in volume on the breakout above the handles resistance line. Duration📅 : 1-6 months for the cup and 1-4 weeks for the handle. Target🎯 : The projected advance after the breakout can be estimated by measuring the distance from the peak of the right side to the bottom of the cup. That will give you your rough estimate. I recommend taking profits as you. I use Pivot points, candlestick patterns, or I simply take profits to determine my exiting strategy. Example: This is American Express Company stock with a cup and handle pattern. • Prior trend only being a few months old. ✅ Cup lasting 1-6 months. (Keep in mind that the cup • does not always have to be equal highs) ✅ • Handle lasting 1-4 weeks ✅ • Breakout with matching volume ✅ I did not get a chance to do a call option on this stock but once again... it made for a great example of a pattern! Rising wedge 🐻📉 The Rising Wedge is a bearish pattern that begins wide at the bottom and contracts as prices move higher and the trading range narrows. This is a reversal patten. Prior Trend🔙 : The rising wedge usually forms over a 3-6 month period and can become a intermediate or long term trend reversal. Trend-lines: At least 2 or more touches of your upper resistance line and 2 or more touches of your lower support line. Contraction: The upper resistance line and lower support line will converge as the pattern matures. Support Break☄ : Bearish confirmation does not happen until the support line is broken in convincing fashion. Once support is broken, there can sometimes be a test of the breakdown meaning your support line will turn into resistance. The stock prices might try to touch the new resistance line. Volume📊 : Volume will decline as prices rise and the wedge forms. There will be an more volume during the breakdown which is confirmation. Example: This is QQQ... A notorious ETF that has an effect on market movement • Prior uptrend lasting 3-6 months✅ 2 or more touches of the support and resistance lines • ✅ • Support line broken in convincing fashion ✅ • Bearish volume during breakout ✅ The following patterns are ones that I don't frequently see or use but I never count them out! I account for all patterns! I literally memorized each patten. And believe it or not, I often refer back to this guide for confirmation. Head and shoulders 👤🐻📉 A Head and Shoulders is a reversal patten. Because it's a bearish reversal patten, there has to be evidence of a previous uptrend. The pattern contains three peaks. Often the head will be the highest peak. Although symmetry is preferred, the and right shoulders do NOT have to be exact. Prior to the breakdown, your neckline is your support line. The neckline does not always have to be horizontal either. Prior Trend🔙 : A prior uptrend must exist in order to establish this pattern. Left shoulder: While up-trending, the left shoulder forms a peak that marks the high point of the trend. After the peak, a decline will mark the completion of the left shoulder. Head🗣 : From the low of the left shoulder, an advance (uptrend) begins that will be higher than your left shoulder. After peaking, the low will mark the second point of your neckline. Right shoulder: The advance from the low of the head will mark the peak of the right shoulder. The peak should be lower than the head and usually in line with the high of the left shoulder. While symmetry is preferred, sometimes the right shoulders can be a little off. The decline from the peak of right shoulder should eventually break the neckline. Neckline: The neckline forms by connecting low points of the end on the decline of the left shoulder, and the low point of the end on the decline of the head. Depending on the relationship of the two low points, the neckline can slope up, slope down, or be horizontal. The slope of the neckline will affect the pattern's degree of bearishness- a downward slope is more bearish than an upward slope. Volume📊 : Volume is very important when it comes to confirmation. Ideally, but not always. Volume should be higher during the advance of the left shoulder than during the advance of the head. Warning signs - the decrease in volume and the new high together and when volume increases on the decline from the peak of the head. Neckline Break: The pattern is not complete until a break in the neckline. It should occur in convincing fashion with increased volume. Support turned resistance: After a break in the neckline, often the neckline/support will turn into resistance. Sometimes the prices will return to the resistance line to give another chance to sell. Price Target🎯 : Measure from the neckline to the peak of the head. Use that same measurement as a rough estimate as to how far the price with drop from the neckline/support line. ⚠ Warning: This is a rough estimate and I always recommend taking profits. Duration: From a few weeks, to 1-6 months as the usual timeframe. Inverse Head and Shoulders 🙃📈 The Inverse Head and Shoulders, sometimes referred to as a head and shoulders bottom, is a reversal patten. There must be a prior down trend to reverse. The pattern contains 3 successive troughs (down trends) with the middle trough (head) being the deepest. Ideally the left and right shoulder will be equal in length and width but that's not always the case. Prior Trend🔙 : A prior downtrend must occur in order for this pattern to exist. Left shoulder: The left shoulder should mark as a new reaction low. After the advance, it will successfully complete the left shoulder. Head🗣 : From the high of the left shoulder, a decline begins that will exceed the previous low and form the low point of the head. An advance should occur right after the low. The high of the advance should mark as the completion of the head and the second point of the neckline. The high of the head can sometimes break the down trend-line. Right Shoulder: The decline from the high of the head neckline begins to form the right shoulder. This low is always higher than the head's low. While symmetry is preferred, sometimes the shoulder can be different. It could be higher, lower, wider, or narrower. Neckline: The neckline forms by connecting reaction highs from left shoulder and head. Depending on the relationship between the two reaction highs, the neckline can slope up, slope down, or be horizontal. Volume📊 : Volume levels during the first half are less important than the second half. The advance from the low of the head should show an increase in volume. After the reaction high forms the second neckline point, the right shoulders decline should have light volume. The most important volume moment occurs on the advance from the low of the right shoulder. For a breakout to be valid, there needs to be an increase of volume on the advance and during the breakout. Neckline Break: The pattern is not complete until the neckline breakouts in convincing fashion. Price Target🎯 : The projected advance if found by measuring the distance from the neckline to the bottom of the head. Use this same measurement for you projected advance for the breakout from your neckline. Duration📅 : From a few weeks to 1-6 months as the usual time frame Triple Bottom Ô🐂📈 The Triple Bottom is a bullish reversal patten. There are 3 equal lows followed by a break above resistance. Prior Trend🔙 : A down trend must exist in order to qualify Three Lows: All three lows should be reasonably equal and well-spaced. They don't have to exact, but within close proximity. Volume📊 : As the triple bottom reversal develops, overall volume levels usually decline. Volume sometimes increases near the lows. After the third low, an expansion of volume on the advance and at the resistance breakout reinforces the soundness of the pattern. Resistance break🚀 : A break of resistance will mark as a reversal. It should break in convincing fashion. Duration📅 : Usually 3-6 months Price target 🎯 : Usually long term reversal. Take profits as you go. Double Bottom Õ The Double Bottom is a reversal patten that is marked as either and intermediate or long term change in trend. Prior trend🔙 : A prior downtrend must exist in order to establish the validity of the pattern. First trough⤵ : The first trough will mark the lowest point of the initial down trend. Peak⤴ : After the first trough, an advance should take place that typically ranges from 10% to 20%. The high of the peak is sometimes round or drawn out. That represents hesitation. Hesitation indicates demand is increasing, but not strong enough for a breakout. Second Trough⤵ : The decline off of the reaction high usually occurs with low volume and meets the already established support line. The time period between the troughs can last for a few weeks to many months, with the norm being 1-3 months. While exact troughs are preferable, a second trough within 3% is considered valid. Advance from trough📈 : Volume is more important during a double bottom than a double top. There should be a clear evidence that volume and buying pressure is accelerating during the advance from the second trough. Resistance Break🚀 : Even after trading up to resistance, the pattern is still not compete until a breakout occurs. A noticeable break of resistance with increased volume confirms a breakout. Duration📅 : The time period between the troughs can last for a few weeks to many months, with the norm being 1-3 months. Double Top ccReversals The Double Top is a bearish reversals patten. Its objective is to reverse an uptrend. Prior trend🔙 : Uptrend lasting several months. First peak⤴ : The first peak should mark as the highest point of the current trend. Trough⤵ : After the first peak a decline takes place that typically ranges from 10-20%. The lows are sometimes rounded or drawn out a bit. Second Peak⤴ : The advance off of the peak usually occurs with low volume and meets resistance from the previous from the previous high. Even after meeting resistance, the possibility of a double top reversal still needs more confirmation. The time period between peaks can range from a few weeks to 1-3 months. While exact peaks are preferable, a peak within 3% is acceptable. Decline from the peak📉 : There should be an increase in bearish volume on the decline, perhaps marked with a gap or two. The declined shows that forces of demand are becoming weaker than supply and test of support is near. Support Break☄ 📉 : Even after trading down to support, the pattern is still not complete. Breaking support between the lowest point between the peaks completes the double top pattern. Of course, an increase of bearish volume should occur. Duration📅 : From a few weeks to 1-3 months. . #6 Option Trading 🛒 Disclaimer⚠ : Options involve huge risks and are not suitable for everyone🚧 . I recommend NOT trying option trading if you are inexperienced. Although options inherently come with great risk, it offers great reward and profits💰 💸 💵 . You could lose hundreds, or even thousands of dollars trying this without understanding market movement, pattern reading, and how to incorporate indicators. It is important to understand that when you buy an option, you must be correct in the direction of the stock's movement💯 , and also the magnitude and timing of this movement. In other words, to succeed, you must correctly predict the whether the stock will of up📈 or down📉 , and you have to correctly predict the magnitude of the price change. You also need to predict the time frame in which all of this will happen🤯 . What are options? 🤔 🛒 Options are instruments a trader can use to buy contracts. They are contractual agreements between two parties👥 . Option contracts give the owner rights and the seller obligations. I only buy call or put options. Calls are essentially betting on the prices of the stock to go up⤴ 3 . Puts are betting on the prices to down3 ⤵ . For a more thorough understanding.... Call option📈 📞 - A call option gives the owner (seller) the right (obligation) to BUY (sell) a specific number of shares (100 shares in Robinhood or Tastyworks) of a stock for a specific price by a predetermined date. It gives you the opportunity to profit from price gains in a stock for the fraction of the cost of owning a stock. You're betting on the stock to go up. Put option📉 ⚓ - A put option gives the owner (seller) the rights (obligation) to SELL (buy) a specific number of shares (100 shares in Robinhood) of a stock at a specific price by a specific date. It gives you the opportunity to profit from falling prices📉 🤯 💸 . Yes, you can now make money while prices are falling. Some investors use put options to protect their portfolio, others use it for financial gain. Me? Financial gain! 🤑 Things you be need consider when trading options • Don't trade money you aren't willing to lose😳 . Each option option trade is theoretically a gamble🎲 🎰 . Using Technical analysis 💡 and staying current with • news📰 will further increase the probability of guessing the stock's direction correctly. Not all stocks provide option trading capabilities B . • Timing is everything⌛ . Give the option some time to deliver your expectations⏱ . Each contract has an expiration date📅 . You can always exit you contract • • • before expiration date to lock in profits🔐 💵 . You can only lose what you put in to the trade. If you paid $50 for trade you can only lose $50. Take profits with gaps💰 . If you happen to purchase an option contract and the stock gaps in the direction of your favor, consider yourself lucky and take profits immediately before the gap gets filled. Not all gaps get filled, but from my experience, most do, especially during a bear market🐻 📉 . You're better safe than sorry. You must gain trader discipline 🧠 and set up trading rules. I'll explain my option trading rules later in this chapter. Each option trade has a break even price⚖ 💰 . A break even price is the price that the stock needs to be in order for you not to lose money before your option expires. You don't profit or lose money. You're even. Consider this a good thing lol2 💯 . Strike price⚾ 💰 - The strike price is defined as the price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the stock when the option is exercised. Strike price is also known as exercise price. I'll explain this in more depth provided with examples and how I choose my strike price. Volatility📉 📈 📉 📈 is a measure of price variance. High volatility⤴ z usually refers to a stock with high rate of price changes. They are riskier to trade, making them more expensive for option trading💸 💸 . They also offer the biggest gains or losses. Low volatility⤵ z refers to a stock with a low rate of price changes. They are less risky to trade and are less expensive for option trading. It gives you a high probability of giving you profit, and low probability of delivering a loss. It's easier on the nerves. How volatility arises🤔 📉 📈 ... Crowd movement. Volatility arises when traders get excited about a new move. They anticipate taking the price to new highs or lows, which arouses greed in bulls🐂 putting on new positions and fear in bears🐻 who scramble to get out of the way buy selling their positions. Volatility tends to be abnormally low before a turning point and extremely high just as the price is taking off. Sometimes volatility can be low for no price related reason. Historical volatility (HV) 🗽 🗿 is a measure of past movement in a stock. Implied volatility (IV) 🥴 is one component of an option’s price and is related to the time remaining until expiration. A trending stock that has low volatility offers the best trade because it has a high probability of giving you a profit and low probability of delivering a loss. It is also easier on the nerves. Here’s why low volatility means the best trade: You can project the price range of a low-volatility trending security into the future with more confidence than a high-volatility security. RobinHood made it easy for you to see the degree of volatility for each stock. By buying an option, you are buying a specific set of rights📜 . By selling an option, you are acquiring a specific set of obligations🤝 . These rights and obligations are standard and are guaranteed by the Option Clearing Corporation (OCC), so you never have to worry about whose on the other end of the agreement. Rules unique to options cost: Liquidity🐬 💦 - The ease at which you can enter a trade without impacting it's price. Low liquidity securities are more expensive. Time📅 ⌛ - The more time you are purchasing, the more expensive the option. Volatility📉 📈 - The more volatile the option, the more expensive. Spread- The difference between the market bid and the ask price. When liquidity is low, the spread widens. Slippage is the money lost due to the spread. Liquidity saves you money. Lean toward higher open interest contracts with higher volumes when trading options to reduce the impact of slippage costs. These liquid contracts can be more easily entered and exited without widening the spread and increasing your costs. Higher volume and less volatility equals cheaper options The more time until the contract expires, the more the option costs. The only problem is, every day you own the contract, time to expiration is decreasing, and so is the option’s value associated with it. Theta is the measure that provides you with the estimated value lost on a daily basis. Value of options depends on The type of options call or put • The open strike price • The price of the stock • Volume • Volatility • Expiration date • Leverage with reduced risk. The greatest benefit of trading individual options is the type of leverage you access. First, consider leverage with the stock market —when buying on margin, you borrow from your broker to buy stock, which gives you the opportunity to own more shares. As you probably know, using leverage this way is a double-edged sword: When using leverage to buy stock you reap additional rewards when the stock moves in your favor, but You also reap additional losses when the stock goes down. I recommend trading options with cash accounts only. Example: Look at SQ (Square, Inc.). This photo shows a prime example of how a call option trade can be more beneficial and cheaper when a stock is in a uptrend. Remember, a call is betting on the price to go up. The ease at which I can profit trading options is far greater than buying 10 shares of Square. The Greeks! ♈♌♐♏♋⛎ Greeks give you the value of expected change in a option. Delta: Represents the expected change in the option value for each $ 1 change in the price of the underlying stock. Gamma: Represents the expected change in delta for each $ 1 change in the price of the underlying stock. Theta: Represents the option’s expected daily decline due to time. Vega: Represents the expected change in the option value due to changes in volatility expectations for the underlying stock. Rho: Estimates changes in the option value due to changes in the risk-free interest rate (usually T-bills). Option price changes attributable to interest rates are much smaller, so this last measure receives less coverage. Using an option calculator, you enter the price of the underlying stock, the option strike price, time to expirations, and the option quote. The calculator then provides each of the Greek values listed. Make money no matter what direction the stock goes 😱💸📉📈 There are 2 strategies that you can use to profit from trading options no matter if the stock goes up or down. These strategies rely on big moves and they are strategies only unique to options. These big moves consist of accelerating prices, increasing volatility, increasing volume, and a long enough expiration date in order to be successful. The 2 strategies that allow you to profit under such conditions are called a straddle and a strangle. Both of these positions combine a long call and a long put. This usually requires the losing price to drop near ZERO while the winning price soars. I only use the straddle strategy. Straddle- A combination position you create by purchasing both a call and a put for the same stock. You use this strategy when you expect a big move in stock but you are not sure of the direction. You construct a straddle by using the following: A long call and a long put. (To account for time decay • and to give the big move enough time to be executed) The same expiration date • Around the same strike price • The reason why the basic form of this strategy requires a large directional move is because all the profits are expected to result from one leg of the position, while the other leg will expire worthless. This is assuming the move is big enough to double or be well above a 100% gain. Here are times you can anticipate big moves🚀 📈 📉 When you see sideways trends or consolidation, you’ll • find it common that big moves happen after prices break away from periods of consolidation. Prior to scheduled events, such as earning reports and • company announcements getting released. Prior to another scheduled event, such as economic • reports. The biggest swings usually occur when the market is counter to the market’s expectations. The best advantage of the straddle is the fact that it does not matter what direction the price moves as long as it moves! The odds are now in your favor. There are 2 more ways a stock can make the straddle profitable: 1. When the winning side of the option is increasing faster than the losing side of the option is decreasing. 2. If you’re able to catch the right direction of the trend in time to sell the losing option side quick enough to not lose all value, and keep the winning option afloat. Example: I bought 2 contracts of both a call and a put. The call I profited $156 and the put I lost $80. I ended up profiting $76. $156$80= $76. You see the ending result here! Below. How to Option Trade Step by Step on RobinHood Mobile🏹 The first thing you need to do is enable option trading by taping the 👤 , and then clicking on “settings”. Next, you click on “option trading”. It'll ask you a series of questions about how much experience you have before account approval. The account usually gets approved instantly. The second thing is that you need to understand how to buy and sell a call/put options on Robinhood. How to BUY a Call Option (puts go through same process) Search for the stock of your choice and then click the “trade” icon, and then “trade options.” I always buy 3-5 days out for short term holds to combat Time Decay. Options lose value the closer they get to the expiration date. This means you will not profit as much as you possibly can purchasing options very close to the expiration. The sweet spot is 3-7 days out because it's less expensive and you can still profit a good amount without time decay effecting your trade. This only for traders who are sure of the direction the stock is moving. In this example, I will be choosing 9 days out to give me time for a comeback just in case things go south. Today is Wednesday, January 16th. I want to purchase a call option expiring on Jan 25th. ALWAYS make sure your option says BUY instead of sell. Also, be sure that your option says CALL. I always choose the option strike price 1 or 2 spaces ABOVE the share price (current price). I personally make sure my strike price is within $1 or $2 ABOVE the share price. Your strike price is your target price. By executing a call option, you're expecting the stock to reach prices higher than your strike price. The more the stock goes up above your strike, the more money you make. If it falls below your strike, or never reaches your strike, you lose money. You have a break even price as well. That is the price your stock has to be at in order to be "even". This means that the value is at zero before your contract expires. You neither win or lose money. We're going to select the $155 strike with a limit of $2.40, expiring Jan 25th. Your limit price is apart of the spread which we'll view below. By buying an option contract you are essentially buying a contract and/or contracts from an unknown person across the market. Your identity is protected under the OCC (Options Clearing Co.). Your limit price is automatically adjusted to the middle of the spread. The spread is a pre-selected priceless range in which you can purchase an option contract. The lowest price of the spread is called your bid price and the highest price of the spread is called your ask. When purchasing a call or put option ALWAYS buy the ask or as close as possible to the ask to get you contract executed quicker! You are trying to convince an unknown individual to confirm your contract so that means you need to come to them with a price close to their "asking" price. Viewing the photo on the bottom left, 1 contract equals your limit price ($2.40) multiplied by 100 shares ($2.40 x 100= $240). $2.36 would be your bid and $2.43 would be your ask. Most apps default contracts multiplying it by 100 shares. If I want to get my contract executed quicker, I would buy the ask price at a limit of $2.43. By executing this contract, the final price will be $240. If you want to multiply your gains because you are sure of the big move you can buy more than 1 contract at a time. As you can see, I executed 2 contracts. This will be your final screen before you execute the option trade. All you have to do is swipe up from the bottom. How to to SELL a call option. Tap “trade”, then tap “sell”. When selling a call option you want to make sure that you are selling near the bid this time! The bid is the lowest price on the spread. $0.60 would be your bid price. But you always test your luck by trying to get a “bang for your buck”. For example, this spread is kind of large, meaning there’s a sizable gap between the bid and the ask price. I would try to use $0.70 to get my contract executed so that I can save $10. This is the last screen you’ll see before selling your option. All you have to do is swipe up to submit! How to Do a Put Option! Purchasing a put option requires the same steps as a call option. You are essentially betting on the stock to go down! The first thing you want to do is search the stock of your choice and tap “trade option”. Then, you want to select a date that is at least 1 month out. When doing a PUT option, you want to buy 1 or 2 spaces BELOW the share price because you are betting on the stock to go DOWN. So, your strike (target price) will be a number LOWER than the share price. The share price is $147.44 and because I believe the stock will go down my target price will be $146. I'm betting on the stock to fall lower than $146. Make sure BUY is selected, and PUT is selected at the top. Now that I've selected my strike and limit price ($146 Put with a limit of $1.80), I'm going to purchase 1 contract. When you're BUYING a contract you always buy near the ask price or exactly the ask price. That will get your contract executed quicker! I'm going to execute 1 contract with a limit of $1.82 that will end up costing $182 because it's multiplied by 100 shares. How to buy and sell options on Tastyworks! 😜 First things first... Make sure your filter is set to table to make it fairly identical to Robinhood. Next, you want to select "trade" when trying to execute a option contract and you can manually type in which stock you want to trade. Let’s be real... rarely do we hold stocks for more than 4 days so I ALWAYS select 2-7 days out as my expiration date. If I’m doing a scalp (quick day trade) and I’m 100% positive of the direction the stock is going, I’d buy 2+ contracts with an expiration date of 2 days out. 💯 THE SHORTER THE EXPIRATION the cheaper the price. Select “choose strategy” to set what type of option you want. Make sure this ALWAYS says “BUY” no matter if you’re doing a call or put. You tap on the “SELL” and it’ll say “BUY”. That’s what you want! Now select “GO”. So, I selected SPY (S&P 500 ETF). Remember our conversation about buying near the “ASK” and selling near the “BID”? Well in tastyworks this plays a major role. Usually Tastyworks will have the best option preselected. It’ll be highlighted. That’s a plus! Click on the price near the ask. You can edit the number of contracts as well. Make sure when editing you delete the top number 1st and then put in the number of contracts. They also let you make last minute changes on your expiration dates. REMEMBER. The closer the expiration, the cheaper. The further the expiration date is away, the more expensive. If you are scalping (day trades), I'd choose a 2 day expiration date. You could load up on contracts. How to sell your contracts! 🤑 Tasty works makes it much easier to sell your contracts. They predetermine the best possible limit price to get you filled most of the time! Tap "portfolio", then tap the stock you want to close. I chose "PYPL". Now, tap on the open contract (the contract you still have open). A open contract will have a number next to it. If the contract is closed (you already sold it), it'll have a zero next to it. Now tap "close". Tastyworks always sells the bid automatically to get your contract executed quicker ("filled"). Tap "review & send" and then tap "send order". #7 Indicators & Divergences 🔮🔭🦠 Indicators are tools many traders use to confirm price action. Technical indicators is a series of data points that are derived by applying a formula to the price data of the security. Price data includes a combination of open, high, low, or close over a period of time. Some indicators may use only the closings prices, while other incorporate volume into to formulas. Each indicators offers something different and unique. Indicators serve three broad functions: to alert, to confirm, and to predict. An indicator can act as an alert to study price action a • little more closely. For example, if momentum is becoming weaker, it could be a signal for a break of support. However, if momentum is rising and prices are falling, that could be a signal of positive divergence and it could foreshadow an uptrend. Indicators can be used to confirm other technical • analysis tools. If there is a breakout on the price chart, a corresponding moving average crossover could serve to confirm the breakout. Or, if a stock breaks support, a corresponding low in the On Balance Volume (OBV) could serve to confirm the weakness. Some traders use indicators to predict the future. Key • word “predict”. Predictions are not facts. I RARELY use indicators to predict. Period: When I use the word period through this chapter, it solely means what time frame you use for your charting. For example, it could be days, weeks, months, or a year. It can also be 1 min, 5 mins, 15 mins, 30 mins, 1 hour, etc. It all depends on your preference. Remember! Not all indicators work 100% of the time. False signals happen often. Indicators are simply put in place to indicate price action. I do not recommend using all indicators as the final say so into whether you should buy or sell a stock. There are some indicators that I look at each day and I will only share with you my favorites because there are hundreds of technical indicators. This guide is here to teach you my methods. Every trader has a set of indicators they find useful. There are thousands of indicator combinations traders use. Indicators should be used with a combination of other things and should not be a stand alone tool. When choosing an indicator to use, choose carefully and moderately. It’s best to start of choosing 2-3 indicators and learn them inside and out. Try to use indicators that serve different purposes instead of choosing indicators that move in unison. For example, it would be redundant to us the Stochastics and RSI indicators because they both generate “oversold” and “overbought” signals. Leading Indicators 🐰 Leading indicators are designed to lead price movements. Most represent a a form of price momentum over a look back period. They are most effective in trading markets and short term holds. Many leading indicators come in the form of momentum oscillators. Generally speaking, momentum measures the rate-of-change of a security's price. As the price of a security rises, price momentum increases. The faster the stock rises (the greater the period-over-period price change), the larger the increase in momentum. Once this rise begins to slow, momentum will also slow. As a security begins to trade flat, momentum starts to actually decline from previous high levels. However, declining momentum in the face of sideways trading is not always a bearish signal. It simply means that momentum is returning to a more median level. Benefits and Drawbacks of Leading Indicators. 🐰 È z Early signaling and exiting is the main benefit. Leading indicators generate more signals and provide more opportunities to trade. They forewarn (warn for the future) potential strength and weakness. For example, in an uptrend you should be watching for overbought signals, moving averages crossovers signals sell, momentum falling, etc. In a downtrend, you should be watching for oversold signals, moving average crossovers signals buy, momentum rising, etc. With early signaling, it leads to higher returns and with higher returns comes the reality of reader risk. This comes with a greater chance of false signals and whipsaws. Whipsaws occur when a buy or sell signal is reversed in short period of time. Volatile markets and sensitive indicators can cause whipsaws. A MACD indicator can be signaling a long buy when the moving averages crossover and the trader will buy it. The next day, the MACD crosses back over for a sell and it causes you to quickly sell. Lagging Indicators🐢 Lagging indicators follow the price action and are commonly referred to as trend following indicators. Rarely, will these indicators lead the prices of a stock. Trend-following indicators work best when markets develop strong trends (uptrend or downtrends). They are designed to keep traders in and keep them in as long as the trend is intact. As such, these indicators are not effective in trading or sideways markets. If used in trading markets, whipsaws and false signals will likely occur. Benefits and Drawbacks of Lagging Indicators🐢 z È The main benefit is to catch a move and remain in a move. They can be very profitable and easy to use. The longer the trend, the fewer the moves and less trading involved. The benefits of lagging indicators are lost when a stock moves in a trading range (like channels). Another drawback is that signals tend to be late. By the time a moving average crossover occurs, a significant portion off the move has already occurred. The challenge of indicators is to find the ones that fit your trading style. I am a opportunistic trader. I take what the market gives me. If there’s a long position, I’ll go long. If the market is volatile or bearish, I’ll do short positions and take profits quickly. With that being said, I use both leading and lagging indicators. For technical indicators, there is a trade off between sensitivity and consistency. Ideally, we want an indicator that is sensitive (indicating buy and sell signals often) to price movement, gives early signals, and has few false signals (whipsaws). If we reduce the trading period for an indicator (change the the time period to a shorter timeframe, such as to 1 week instead of 3 weeks), it will provide early signals but more false signals. If we decrease sensitivity by increasing the timeframe, false signals will decrease but so will your profits. This is known as your riskto-reward ratio. I use a total of 5 indicators: Moving averages (exponential, simple), On Balance Volume (OBV), Relative Strength Index (RSI), MACD, and Pivot Points. Moving averages🧬🧬 Moving averages are made to smooth out the price data to form a trend following indicator. They are lagging indicators. They do NOT predict direction, but they define the current direction with a lag. Moving averages lag because they are based on past prices. Despite this lag, moving averages filter out the noise. They are also the building blocks for other technical indicators such as Bollinger Bands and MACD. The two most popular moving averages are Simple Moving Averages (SMA) and Exponential Moving Averages (EMA). A rising moving average shows that prices are generally increasing. A falling moving average indicates that on average, prices are decreasing. Simple Moving Average (SMA)2 Simple moving averages are formed by calculating the average price of a security over a specific number of periods. Most moving averages are based on closing prices. A 5-day simple moving average is a 5-day sum of closing prices divided by 5. This average moves as days go by and closing prices change. Example Daily Closing Prices with a week: 11,12,13,14,15,16,17 First day of 5-day SMA: (11+12+13+14+15) / 5 = 13 Second day of 5-day SMA: (12+13+14+15+16) / 5 = 14 Third day of 5-day SMA: (13+14+15+16+17) / 5 = 15 Calculating moving averages are not important but understanding how they’re calculated and how to use them are. In the TradingView app, the calculations are made for you. I circled where you can find the moving averages in the indicator section. Exponential Moving Average (EMA)🔢 Exponential moving averages reduce the lag by applying more weight to recent prices. The EMA responds more quickly to recent prices than the SMA does. EMAs calculation depends on all the calculations for all the days prior to that day. You need far more than 10 days of data to calculate a reasonably accurate 10 Day EMA. The formula for calculating the EMA just involves using a multiplier and starting with the SMA. Example Time period = 10 days Initial SMA: 10 day sum / 10 Multiplier formula: (2 / (time period + 1)) (2 / (10 + 1))= 0.1818 (18.18%) Calculating the EMA: [Closing price-EMA (previous day)] x multiplier + EMA (previous day) A 10-period exponential moving average applies an 18.18% weighting to the most recent price. A 10-period EMA can also be called an 18.18% EMA. Like I said before, calculating the moving averages aren’t important but understanding how they work is the important part. SMA vs EMA🌀 Even though there are clear differences between simple moving averages and exponential moving averages. Exponential moving averages have less lag and are therefore more sensitive to recent prices - and recent price changes. Exponential moving averages will turn before simple moving averages. Simple moving averages, on the other hand, represent a true average of prices for the entire time period. As such, simple moving averages may be better suited to identify support or resistance levels. A bullish crossover occurs when the shorter moving average crosses above the longer moving average. This is also known as a golden cross. A bearish crossover occurs when the shorter moving average crosses below the longer moving average. This is known as a dead cross. Examples Some traders use two of the same moving averages but different time periods. For example, they'll use 5-day EMAs and 35-day EMAs. This is considered a short term system. A system using a 50-day SMA and a 200-day SMA can be considered medium and long term. I adjust accordingly. I use a 9 or 10-period SMA and 9 or 10-period EMA at the same time for short term trends. Moving average crossovers produce relatively late signals. After all, the system employs two lagging indicators. The longer the moving average periods, the greater the lag in the signals. These signals work great when a good trend takes hold. However, a moving average crossover system will produce lots of whipsaws in the absence of a strong trend. How I Use Moving Averages as an Indicator! (Short Term)♻ When the EMA (green) crosses above the SMA (purple) it generates a buy signal. This is called a golden cross. When the EMA (green) crosses below the SMA (purple), that generates a sell signal. This is called a dead cross. The EMA can also act as support and resistance as well. EMA acts quicker than the SMA. Generally for both moving averages, when the prices rise above the EMA and SMA, that generates a buy signal. When prices drop below the SMA and EMA, that generates a sell signal. I use both moving averages at the same time. Remember that these are lagging indicators and are most suitable for staying in a trend and providing stop losses. Trying to solely depend of moving averages can make you miss a chunk of profits. I use them to confirm short, medium, and long term trends, breakouts, and reversals. You can use them during short periods but be prepared to sell your position/take profits in a short time as well. Theoretically, the longer the moving averages stay within a trend without crossing over, the longer you should hold. But I always recommend taking profits as you go. I’ll explain this in more depth next with pivot points. Time Frame for Moving Averages The time frames for moving averages solely depend on the traders objective. I am typically a short and medium term trader. I take profits fairly quickly. So I use a 5-20 period EMA and SMA (I use mostly 10 periods). Medium trends usually extend to 20-60 periods. Long term trend usually extend to 100 or more periods. Popular Moving Average Time Frames 200 day moving average is the most popular for long term traders. Next, 50 day moving average is popular for mediumterm trends. Many traders use the 50 day and 200 day moving average together. For short-term the 10 day moving average is popular. When NOT to Use MAs • • As the only indicator for buy and sell signals When stocks are trading sideways. They’ll be too many crossovers and they’ll be late. Pivot Points 🧱 Pivot points are a levels you can use to determine directional movement and potential support/resistance levels. Pivot points use the prior period’s high, low, and close to estimate future support and resistance levels. In this regard, pivot points are predictive or leading indicators. I use the Standard Pivot points. Time Frame Pivot Points for 1, 5, 10, and 15 minute charts use the prior day’s high, low, and close. That means that using these time frames would make the current chart based solely on yesterday’s high, low, and close. Once pivot points are set, they do not change and remain in play throughout the day. Pivot Points for 30, 60, and 120 minute charts use the prior week’s high, low, and close. These calculations are based on calendar weeks. Once the week starts, the pivots for 30, 60, and 120 minute charts remain fixed for the entire week. They do NOT change until the week ends and new pivots can be calculated. Pivots of a daily chart will be based on the prior months data. So that means that April 1st would be based on high, low, and close of March. They remain fixed the entire month of April. New pivots will calculate on the first trading day of May. These will based on the the on April’s high, low, and close. Pivots for weekly charts use the prior years data. Standard pivot points begin with a base pivot point. This is the average of the high, low, and close of the prior period. The middle pivot point is the solid line between the support and resistance pivot points. Example of how pivot points look: Locate pivots in the indicator section. They'll be labeled "Pivot Points Standard" Calculations Pivot Point (P)= Prior periods (high + low + close)/3 Support 1 (S1)= (P x 2) - High Support 2 (S2)= (P x 2) - Low Resistance 1 (R1)= (P x 2) - Low Resistance 2 (R2)= P + (High - Low) How to use Pivot Points! I ONLY use Standard Pivots for day trading. That means I only use the 1, 5, and 15 minute charts. Realistically, I only use 5 and 15 minute charts because I’m more comfortable with the 5 and 15 minute candles. Ideally, pivot points are levels that you’re projecting a stock to reach. From my experience they are extremely accurate and easy to use. In fact, this is definitely in my top 3 must use indicators everyday! For example, if you see prices crossing down the P (pivot), it’s next projected stop will be S1 (Support 1). If you’re in a put option, I suggest you take profits the moment the prices touch S1. S1 is your 1st level of support. That means prices can bounce up from it. If the prices break S1 pivot line convincingly and it’s heading downwards, consider re-entering the put option because the next stop is S2 (Support level 2). Another Example: This is a good example of the strategy I use when using pivot points. Pivot points are meant to be adjusted accordingly. If prices rise above support 2 (S2), that line becomes my new support and support 1 (S1) is my new target/exiting point/ resistance. Make sure you are aware of the trend. Make sure that you draw the trend line to confirm up and down trends as well. Also be sure to recognize where the market opened! Remember that stocks move left to right. The first candlestick furthest to the left where the new pivot lines start is your opening price. On Balance Volume (OBV)🔌 On Balance Volume measures buying and selling pressure as a cumulative indicator that adds volume on up days and subtract volume on down days. This indicator measures positive and negative volume flow. You can look at divergence between OBV and price to predict movements or use OBV to confirm price movements or use OBV to confirm trends. This is one of my favorite leading indicators! Calculation🔢 The OBV line is simply a running total of positive and negative volume. A period’s volume is positive when the the close is above the prior close. The period’s volume is negative when the close is below the prior close. Remember knowing how to calculate indicators aren’t that much important but understanding how they work is. But for those of you that are interested, calculations are listed below. If the closing price is above the prior close price then: Current OBV = Previous OBV + Current Volume If the closing price is below the prior close price then: Current OBV = Previous OBV - Current Volume If the closing prices equals the prior close price then: Current OBV = Previous OBV (no change) The Rundown on OBV• 💨 The theory is that volume precedes prices. OBV rises when volume on up days outpaces volume on down days. OBV falls when volume on down days is stronger. A rising OBV reflects positive volume pressure that can lead to higher prices. Conversely, falling OBV reflects negative volume pressure that can foreshadow lower prices. Research shows that OBV would often move before price. Expect prices to move higher if OBV is rising while prices are either flat or moving down. Expect prices to move lower if OBV is falling while prices are either flat or moving up. The absolute value of OBV is not important. You should instead focus on the characteristics of the OBV line. First, define the trend for OBV. Second, determine if the current trend matches the trend for the stock. Third, look for potential support or resistance levels. Once broken, the trend for OBV will change and these breaks can be used to generate signals. Also, notice that OBV is based on closing prices. Therefore, closing prices should be considered when looking for divergences or support/resistance breaks. And finally, volume spikes can sometimes throw off the indicator by causing a sharp move that will require a settling period. OBV can be spotted in the indicator section as "OBV" OBV Divergences Bullish and bearish divergence signals can be used to anticipate a trend reversal. These signals are truly based on the theory that volume precedes prices. A bullish divergence forms when OBV moves higher or forms a higher low even as prices move lower or form a lower low. A bearish divergence forms when OBV moves lower or forms a lower low even as prices move higher or form a higher high. The divergence between OBV and price should alert you that a price reversal could be in the making. Bullish OBV Divergence🐂📈 This is an example of bullish divergence because as prices were trending downward, notice that the OBV broke resistance days earlier. This should alert a trader that a trend reversal is about to take place. This is a leading indicator so that means it’s intended to predict the future. As you can see, after that resistance break of the OBV, prices went into a uptrend. Bearish OBV Divergence This is an example on bearish divergence because as prices were trending upward on SPY, the OBV was on the verge of breaking support. That vertical dotted line shows that they're in the same time frame. The OBV broke support nearly a week before SPY did. This should have alerted traders to either sell SPY or enter a put option position. Also Rising OBV during an uptrend is a good indicator that the trend will continue. Falling OBV during a downtrend indicates that downtrend will continue. Oscillators An oscillator is an indicator that fluctuates above and below a centerline or between set levels as it’s value changes over time. Oscillators can remain at extreme levels (overbought and oversold) for extended periods, but they cannot trend for a sustained period like the OBV can. Relative Strength Index (RSI) &🔨 Relative Strength Index is a momentum oscillator that measures that speed and change of the prices movements. RSI oscillates between 0 to 100. RSI is considered overbought when above 70 and oversold when below 30. Signals can also be generated by looking for divergence, failure swings, and centerline crossovers. RSI can even be used to identifying the general trend. RSI is an extremely popular momentum indicator. The default look-back period of the RSI is 14, but this can be lowered to increase sensitivity, or raised to decrease sensitivity. This means that the shorter the period, the more oversold and overbought signals. In contrast, the longer the period, the the less amount of signals but comes with more accuracy. 10-day RSI is more likely to reach overbought and oversold levels than 20-day RSI. The look-back period also depends on the stock’s volatility. 14-day RSI for Tesla is more likely to become oversold and overbought than General Motors (GM). Although RSI is considered overbought when above 70 and oversold when below 30, they can be adjusted to better fit the stock or the trader’s requirements. I personally say “if it ain’t broke don’t fix it”. Raising the overbought to 80 and oversold to 20 will decrease the number of overbought/oversold readings. Short term traders sometimes use 2-period RSI to look for overbought readings above 80 and oversold readings below 20. The RSI is located in the indicator section labeled as "Relative Strength Index". RSI Divergences A bullish RSI divergence occurs when the stock makes a lower low point and the RSI forms a higher low. RSI does NOT confirm the lower low and this shows strengthening of up-trending momentum. A bearish RSI divergence forms stock records a higher high and the stock forms a lower high. Bullish RSI Divergence This is an example of bullish divergence because as the stock (SPY) prices are falling and made a lower low, RSI rejected the trend and formed a higher low. When this happens it should alert the trader of a possible trend reversal in the near future. Sure enough, the stock prices begun to rise after the bullish divergence. Bearish RSI Divergence This is an example of Bearish RSI Divergence because as SPY formed a higher higher, the RSI rejected the trend and formed a lower high. When this happens it should alert the trader of a possible trend Reversal in the near future. Sure enough, the stock prices begun to fall after the bearish divergence. MACD (Moving Average Converge/Diverge) ✂🔗 The MACD is one of the most simple and most effective indicators. It turns two moving averages into momentum oscillators by subtracting the longer moving average from the shorter moving average. As a result, the MADC offers the best of both worlds: trend following and momentum. The MACD fluctuates above and below the zero line as moving averages converge, cross, and diverge. Traders can look for things like signal line crossovers, centerline crossovers and diverges to generate signals. The MACD shouldn’t be used to identify oversold and overbought signals. MACD is located in the indicator section. Calculation: MACD Line: (12-day EMA - 26-day EMA) Signal Line: 9-day EMA of MACD Line MACD Histogram: MACD Line - Signal Line The values 12, 26, and 9 are default values but you can change it depending on your trading style. The MACD is all about converge and diverge of the two moving averages. Converge occurs when the two moving averages move toward each other. Divergence occurs when the two move away from each other. The shorter moving average is faster and responsible for more movements. The longer moving average (26-days) is slower and less reactive to price change. The MACD line oscillates above and below the zero line, which is also known as the centerline. These crossovers signal that the 12-day EMA has crossed the 26-day EMA. Positive MACD (buy signals) indicate that the 12-day EMA is above the 26-day EMA. This means momentum is increasing. Positive values (prices going up) increases the further the shorter EMA diverge from the longer one. Negative MACD (sell signal) indicate that the 12-day EMA is below the 26-day EMA. Negative values increase as the shorter EMA diverge further below the 26-day EMA. Negative (prices going down) values increase as the shorter EMA diverge further below the longer EMA. Centerline Crossovers A bullish crossover happens when the MACD moves above the zero line to turn positive turn upward and cross above the signal line. A bearish crossover happens when both of the EMAs cross down below signal line. This happens when the 12 day EMA of the stock moves above the 26-day EMA. A bearish centerline crossover occurs when the MACD moves below the zero line to turn negative. This happens when the 12 day EMA moves below the 26-day EMA. Centerline crossovers can last a few days or a few months. It all depends on the strength of the trend. The MADC will remain positive as long as there is a sustained uptrend. The MACD will remain negative when there is a sustained downtrend. Example: This is a good example of how simple the MACD is. It works the same as moving averages but now the moving averages help act as a momentum indicator as well. MACD Bullish Divergence Divergences form when the MACD diverges from vine price action of the stock. Bullish divergence occurs when a stock records a lower low and the MACD records a higher low. The lower low of the stock affirms a downtrend but the the higher low of the MACD shows less downside momentum. Despite less downside momentum, downside momentum is still outpacing upside momentum as long as the MACD is in the negative territory. Slowing downside momentum can sometimes foreshadow a trend reversal or a sizable rally. This is great example of bullish divergence of the MACD indicator. As UPS recorder a lower low, the MACD recorded a higher low. That foreshadowed a future uptrend and confirmed bullish divergence! Sure enough, UPS broke out and made a run. MACD Bearish Divergence A bearish divergence forms when a stock records a higher high and the MACD Line forms a lower high. The higher high in the stock is normal for an uptrend, but the lower high in the MACD shows less upside momentum. Even though upside momentum may be less, upside momentum is still outpacing downside momentum as long as the MACD is positive. Upward momentum can sometimes foreshadow a trend reversal or sizable decline. Example: This is a good example of bearish divergence! As spy recorded a higher high, the MACD recorded a lower high. This foreshadowed a downtrend and confirmed bearish divergence! #8 Other Advanced strategies I use! 🧪🔬💉 Buying on the Third Touch of Support Ô The “three touch rule” and “breaks of support lines” is something I keep in mind each and everyday. There are plenty of times when I’ve bought on the third touch Ô of a support line and it worked out perfectly. 📚 Studies show that a high percentage of uptrends are followed after three touches of the support line. But, it is very risky to buy on the second touch. You want to draw ✏ a support trend line and sell when the prices break that line of support. Example: This is Adobe and I applied the 3 touch rule Ô to perfection back in November. I sold at the break of support. I did a call option and profited $447! I’ll take it. 💸 Selling on the third touch of Resistance Ô Selling on the third touch of resistanceÔ is another strategy to use. It's very effective when used to confirm a downtrend 📉 . Studies show that it is safer to sell during three touches of your resistance line. I usually close my position after I make a good enough profit🤑 , I do not recommend waiting as long as the example above states. This is a good example of selling on the third touch of resistance. I sold at the third touch by executing a put option. I was very confident in a downtrend so I added in 5 contracts. I ended up profiting $707!💸 🤑 Trend Following 🐾🐾 Trend following 🐾 🐾 is my very first strategy I ever used. Trend followers usually wait out sideways trading or retracements and only buy when the prices trade back into a trend. Some also use momentum indicators like the RSI and take profits when stocks are overbought💸 📈 and buy the stock back again when the RSI indicates oversold📉 💸 . Example: Here's the result of me holding CGC for that long below. I came out profiting $1,068🤑 ! CGC will always be my first love. This is the first stock I ever analyzed and kept up with. Notice how I waited until it broke out of a sideways market before buying. That is trend following executed to perfection. Swing Trading õ⛳ Theoretically 💡 🧠 the example above is how swing trading is supposed to work and I've done it this way on numerous occasions. But another strategy of swing trading that I use is holding a stock position (options or buying shares) for days in efforts to get the most profits 💰 . It can be an overnight 🌃 hold, or it can be held for weeks. This usually occurs after a breakout that I see medium/long potential in. Swing traders operate whether a trend is present or not. The key is to buy at relatively lows and sell at relatively highs. Swing trading is more effective because you can apply these techniques under different market conditions (bearish, bullish, or sideways markets). The draw back to swing trading 📲 📲 is that it requires more frequent trading than trend following. Example: This is an example of how I used swing trading effectively when prices are trading sideways. The key 🔑 is to draw ✏ your support and resistance lines once you see an established trend of reaction lows and reaction highs. Once I saw a trend taking place, I started to buy💸 at the lows⤵ and sell at the highs⤴ . The picture below shows the money I've made executing this strategy🤑 . On the left side you see that I executed a SPY put at the 2nd reaction high "#1 sold here", and on the right side you see where I executed a SPY call at the 2nd reaction low "#2 bought here". This is swing trading executed to perfection. Gaps ⤴⤵ Often when you look at charts you’ll see empty spaces known as gaps. They represent times when no shares were traded within a particular range. Normally this happens between the close of one day, and the open of the next day. You’ll see them quite often on candlestick charting and you won’t see them at all on line charts. Up gaps⤴ are considered bullish and this happens when there’s a space between two candles. The candle that gapped up will be above the previous candle. Down gaps⤵ are considered bearish and this happens when there’s a space between two candles. The candle that gapped down will be below the the previous candle. Example: Gaps result from extraordinary buying and selling interest developing while the market is closed for the day. For example, if a earnings report with unexpected high earnings comes out after the market has closed for the day, a lot of buying interest will be generated overnight, resulting in an imbalance between supply and demand. When the market is opens the next morning, the price of the stock rises in response to net increased demand from buyers. Gaps can offer evidence that something significant happened to the fundamentals or the psychology of the crowd that accompanied this market movement. Timeframe of Gaps Up and down gaps can form on dialysis, weekly or monthly charts, and are are significant when accompanied with higher than average volume. Gaps appear more often on daily charts, where everyday is a new opportunity to create an opening gap. Gaps on weekly or monthly charts are rare. I never focus on weekly or monthly charts, only daily for the most part. A daily chart is one with a time frame of 1D (1-day). Price charts with gaps almost everyday is typical for thinlytraded stocks and should be avoided. Type of Gaps Gaps can be divided into four categories: common, breakaway, runaway, and exhaustion. Common Gaps 👤 💨 Sometimes referred to as a trading gap or area gap are usually uneventful. This means no significant news, or rumors caused buying or selling interest. The gap just happened. That’s why they are called common gaps. These gaps tend to get filled fairly quickly. Most of the time they get filled within that trading day, but other times they can get filled days or weeks later. Getting filled means that eventually, prices will retrace (for up gaps) or rise (for down gaps) to fill up the gap. This is usually the case. Example: This is Apple and they presented two common gaps that eventually got filled. The prices gapped down after market and continued down the next day. That’s why they say gap downs are typically bearish. It provides huge selling interest during the after and premarket. When prices close the gap, that means it got filled. Breakaway Gaps 🔓 💨 Breakaway gaps are the exciting ones. They occur when the price action is breaking out of a trading range or congestion area. To understand gaps, one has to understand the nature of congestion areas in the market. A congestion area🤒 is just a price range in which the market has traded for some period of time, usually a few days or weeks. The top of the congestion area is resistance and the bottom of the congestion area is support. To break out of these areas requires market enthusiasm, and either many more buyers than sellers for upside breakouts or many more sellers than buyers for downside breakouts. Volume should pick up significantly, not only from increased enthusiasm, but because many are holding positions on the wrong side of the breakout and need to either cover their positions or sell them. It is better if the volume does not happen until the gap occurs. This means that the new change in market direction has a chance of continuing. DON'T fall into the trap thinking this type of gap (if associated with good volume) will get filled soon. Go with the fact that a new trend trend in the direction of the stock has taken place. A good confirmation for breakaway gaps is whether they are associated with a good chart pattern and break either the line of resistance or support. Example: This is Canadian marijuana stock Tilray and they presented a good example of a breakaway gap because the gap broke out of a pennant pattern. Notice that after the breakout, the prices continues to rise and the gap has yet to get filled. Runway Gap • 💨 Runaway gaps are also called measuring gaps and are best described with increased interest of the stock. For runaway gaps to the upside, it usually represents traders who did not get in during the initial move of the up trend and while waiting for a retracement in price, decided it was not going to happen. Increased buying interest happens all of a sudden, and the price gaps above the previous day's close. This type of runaway gap represents an almost panic state in traders. Also, a good uptrend can have runaway gaps caused by significant news events that cause new interest in the stock. Example: This is apple and they presented a good example of a runaway gap. This happens when increased buying interest is still present even after the breakout. Exhaustion Gaps 😩 Exhaustion gaps are those that happen near the end of a good uptrend or downtrend. They are many times the first signal of the end of that move. They are identified by high volume and a large price difference between the previous day's close and the new opening price. They can easily be mistaken for runaway gaps if one does not notice the exceptionally high volume. It is almost a state of panic if the gap appears during a long down move where pessimism has set in. Selling all positions to liquidate holdings in the market is not uncommon. Exhaustion gaps are quickly filled as prices reverse their trend. Likewise, if they happen during a bull move, some bullish euphoria overcomes trades, and buyers cannot get enough of that stock. The prices gap up with huge volume. Then, there is great profit taking and the demand for the stock totally dries up. Prices drop, and a significant change in trend occurs. Example: The high volume was the giveaway that this was going to be either an exhaustion gap or a runaway gap. Because of the retraced right after the breakout, this was a clear indicator of an exhaustion gap. My Golden Setup ⭐ 💰 🍯 After Market This is the set up I use after market before I go to bed at night. SPY is always the first stock I look at. I have my 3 favorite indicators and I use them all for confirmation to either stay in a trend or get out it. Remember that everyone's setup will be unique to their trading style. No one's setup will look the same. Every trader is unique. My trading style is very precise and by the book. I consider my trading style to be very accurate in terms of technical analysis. You do NOT need a spaghetti bowl to be good at technical analysis. • • • I make sure that the OBV, RSI and MACD are staying in accordance to the trend. I want to be sure that there's no divergences present. I use my pivot points on the daily chart (1-day) to get a projection of what level I think the stock is heading. When I look for patterns I am watching for support and resistance lines. Patterns come in all shapes and sizes. Don't get accustomed to one pattern, learn them all. Every Night I go through a basic watchlist before bed: 1. Futures: SPY, QQQ, DIA, VOO...etc 2. Tech stocks: APPL, MSFT, MA, FB, SQ, V, AMZN, INTC, CRM, PYPL, NVDA, TSLA, ATVI, EA, AMD, MTCH, ZG, TTD, YELP, ADBE, UTX, CSCO, VZ, T, ORCL, MU, AMD, ADBE, SHOP, BABA, BIDU, BAND, MRVL, CSCO, IQ, NFLX, QCOM, NXP, STNE, TWTR, FTNT, GOOG, VMW, etc.. 3. Marijuana stocks: TLRY, CGC, CRON, ACB, NEPT, MJ, NBEV 4. Pharmaceutical Co.: JNJ, CVS, CNC, ICLR, ABBV, ZTS, ALGN, BDX, ANTM, BMRN, PFE, MRK, BMY, VRX, LLY, LGND, MED, INGN... etc 5. Banks: BAC, CFG, MS, CME, JPM, GS, PYPL, BRK.B, USB, IBKR, AXP,...etc 6. Food & Beverage: KO, PEP, MCD, STZ, LW, MDLZ, TAP, SBUX, KR, WLMT,..etc During the Trading Hours (9:30am-4pm) From 8:30am to 9:30am, I am reviewing my watchlist, checking on last minute news articles, and seeing about any last minute news articles. During the day I am using pivot points, support lines, and moving averages to formulate a entering, exiting, and target point. During a uptrend, I stay within the trend with a call option until 1. Prices fall below the moving average 2. The prices officially break the support line 3. I take profits at every resistances point on the Pivot point chart. Example: During a Downtrend, I stay within the trend with a PUT option until: 1. Prices fall above the moving average 2. The prices officially break the resistance line 3. I take profits at every support line on the pivot point indicator Sources I Use to Get the Latest News and Rumors These are the apps I use to get the latest News. I bunch them all together on my phone to make them easily accessible. My Top 3 are Seeking Alpha, Bloomberg, and Yahoo Finance. Make sure you add all of the stocks in your watchlist to each one of these apps. I know it's time consuming but it'll benefit you in the long run! Staying current with the news is important. #9 My Chat🗣💰📚🧠 What does my chat offer? My chat offers 1 on 1 training, mentoring, daily signals, webinars (live video training every Sunday), daily watchlist, teaching technical analysis daily (patterns, indicators, and charting), daily news updates, price alerts, a library full of free books, hand crafted PDFs on charting by me, hand crafted option trading guides step by step by me, and unlimited answers to your questions by me or a person in the chat. This chat is designed to be family oriented. We share all of our ideas. The link to pay and subscribe to my chat is $100. Here are my money making channels! #aristotle-scalps: This is where I post day trades, gap fills, and quick plays for those who have apps other than RobinHood with capabilities of day trading more frequently. Example: #aristotle-alerts: These are hand crafted alerts that I set up and provide to my group. They have a whopping 95% success rate on swing trades. Example: #option-signals: This is where we discuss random option trades that are working for us and shout out it out to the group. Example: #aristotle-targets: These are my projected targets and exiting points. Example: #aristotle-swing-trades: This is arguably everyone's favorite channel. This is where I tell people what to buy and hold for more than 1 day at a time. These have 90% success rate when entered. #track-our-trades: This is where I track every trade we enter as a group, mainly swing trades. #small-account-trades: This is a channel made exclusively for those interested in building smaller accounts-low risk trades with profitable gains. We have more channels as well that gives my chat an edge in trading options and overall stock market education! Here’s a few more examples! #Watchlist: I and a few other members post or daily watchlist. To prepare for the next day. #training: A great source for getting ahead. I hand craft PDFs and post my favorite books in there free of charge. If you want to subscribe to my group, feel free to DM me @aristotle_investments on Instagram. There’s a link in my bio As well. #10 Trading Rules for CALL and PUT Options💯📚 • For a CALL OPTION, do you have a BULLISH pattern? - Pennant, flag continuation, falling wedge, cup and handle, bullish symmetrical triangle, ascending triangle, bullish channel, triple bottom, head and shoulders bottom, or rounding bottom For a PUT OPTION, Do you have a BEARISH • Pattern? - Pennant, rising wedge, double top, descending triangle, bearish channel, triple top, bearish symmetrical triangle, or head and shoulders top. • Did it noticeably break the resistance (call option) or support (put option) line in convincing fashion with rising volume? For long term pattern's that formed between 3-6 months wait for a break of at least 2-3%. Is the latest news negative (put option) or positive • (call option)? Check Seeking Alpha, Investing.com, and yahoo finance. • Do you have a day trade or unlimited day trades available just in case things go south? For Robinhood users, go to account summary, scroll all the way down, and check. Is the call or put option too expensive? • Never risk more than 10% on a trade. Ex. If your account is $2000, you shouldn't risk more than $200. • What does the indicators say (OBV, MACD, Momentum, RSI, Pivot Point, etc.)? Make sure there’s no bearish divergence when trying to execute a call option. Bearish divergence occurs when the stock makes a HIGHER high but the indicators makes a LOWER high. Red flag for potential downtrend. Make sure there’s no bullish divergence when trying to execute a put option. Bullish divergence occurs when stock makes a LOWER low but an indicator makes a HIGHER low. Good sign for potential uptrend. • Is it a quick scalp? Is there a clear trend line present going up or down? Use pivot points for day trading targets. Patience is key. 🆕Frequently asked questions ú🙋⁉ How long have you been investing? I've been investing for over 1 year. I’ve been studying Investing for about a year and a half. How did you learn so fast? I learned fast by reading and studying every single day. The knowledge I have is equivalent to 5 years of experience. I accelerated my investing knowledge. What's the most money you've made in one day? What made you start investing? I knew that I had to do something with all the money I saved. Investing always struck my interest. It was my New Years resolution for 2018 to learn investing and take it seriously. I invested all of that money you see below. What is your ultimate goal? My goal is to be wealthy and find ways to mentor the young men and women from my community about investing and financial empowerment. What stocks would you invest in long term? So far, I'm going with Canopy Growth, Cronos Group, Aurora Cannabis, Square Inc., Paypal Inc., Facebook, BIDU, General Motors, Microsoft, New Age Beverage, Match.com, Nike, Neptune Wellness, Disney, and MJ. What is your favorite stock? Canopy Growth is my favorite stock because it's the first stock I thoroughly researched, analyzed, and fully invested in. How much money should I start investing with? $500 is my recommended starting amount. What's the most money you've lost in 1 day and why? $2000... I betted on an Apple earnings report going up and did not do my research. If you had to start over what would you do differently? I would not hop into option trading so quickly. The best thing you can do is educate yourself. A lot of people want others to do the work for them. You'll never be successful that way. What made you think of writing this book? You guys are getting robbed by these instagram investors. "If you give a man a fish, he'll eat for one day. But if you teach a man how to fish, he'll eat forever." I got tired of seeing these guys give everyone the bare minimum. I decided to give you guys a full meal! Where does the name Aristotle come from? My real name is Makarios Aristotle Varner, Jr. Aristotle is my middle name! It plays into my character as an intellectual person. Makarios is Greek for being blessed and highly favored. I believe my names describe me well. What drives you to be who you are? Honestly, as I grew up in this world I saw a lot of flaws in our system. I see a lot of successful but selfish individuals who can do more for others but choose to look down on them instead. It's a lot of talented young men and women just like me who deserve someone that'll discover them, listen to them, and help them. My motivation is my family as well. I want to be a role model for them. As I'm currently writing this, my wife is 2 months pregnant and I want to give her and my child the life they deserve. My baby is due August 2019.