Summary of

A POST TO REMEMBER:
COMPREHENSIVE GUIDES TO
STOCK MARKET TRADING 101

I. Knowing yourself

A.Trader profile
1.) Trend following
-following a trend so only follow if there is a trend

2.) Breakout trading

-looking at indicators, like momentum indicators, MAs and darvas boxes pero most importantly
yung support and resistance

3.) Bounce plays/reversals

-spotting a key low requires a lot of experience
-uses supports and fibs as well as candlestick patterns that tells reversal of downtrend
-some use RSI overbought
-hard because the trend is against you

4.) range trading or scalping

-stocks trading within a range
- good knowledge on how prices react on support and resistances is key

Determining risk appetite

-stop loss is correlated to your allocation
*Always check your performance- journal everything whether it is a win or a loss. Include the
emotions and thought process behind the trade.
*if something does not work, don’t repeat it di pala gumagana e.
*The money is in the details
*The holy grail of trading is YOU: Your state of mind and thought process

II. TECHNICAL ANALYSIS

A. SUPPORT AND RESISTANCE

1.) Price Action Dynamics, Support & Resistance, and Role Reversal
-basic lang yung horizontal S&R kaya wala tayo summary non so move on sa dynamic S&R

2.) Dynamic S&R

Trading with rayner blog about S&R

Truth#1: The more times the S&R is tested, the WEAKER it becomes!
-The market reverses at Support because there is buying pressure to push the price higher. The
buying pressure could be from Institutions, banks, or smart money that trades in large orders.
Imagine this:
If the market keeps re-testing Support, these orders will eventually be filled. And when all the
orders are filled, who’s left to buy?
-Higher lows into Resistance usually result in a breakout (ascending triangle). Lower highs into
Support usually results in a breakdown (descending triangle).

Truth#2: S&R are areas and not just lines

-why? Because you there are situations where price undershoots and you miss the trade or
price overshoots and you assume S&R is broken.
-Price undershoots meaning it reversed before without reaching the S&R. Price overshoots
mean false breakouts.
-Why are SR areas on chart? Because of FOMO and traders who want to get the cheapest
prices! These two groups (FOMO and cheapos) buy at different prices or areas related to the
SR so this means there are two areas of buying and not just a single line or price.
-the area of support or resistance is between wick and body

Truth#3: SR can be dynamic

-There are trend lines and MAs.
-even though they are dynamic, still treat them as areas and not just lines.

Truth#4: SRs are the worst areas to put your stop loss.
-set your stop loss a distance from SR and not just below the support

Truth#5: Trading at SR gives you favorable RRR

-wait for price to give you great RRR. Stay away from bad RRR
-aim for 3:1 RRR (ZFT)

*if there is a consolidation in a support or resistance, chances are the SR is likely to break as
the bulls in a support or the bears in the resistance are losing strength.

Summary of Rayner’s video “Trading breakouts like a pro”:

-be cautious in trading breakouts if stock is on a downtrend.
-trade close to a support or darvas box support
-trade breakouts with buildup within resistance!

Rayner’s tip in swing trading (long market):

1.) Mark areas of SR
2.) Wait for prices to move towards SR
3.) Wait for price rejection
4.) Enter on the next candle with cut loss beyond the swing low
5.) Take profits at the swing high
Trading with Rayner Price Action trading Strategy

Two moves in a trend:

1.) Impulse move- “Longer leg” on the chart which points the direction of the trend. Candlestick
size is usually larger, signaling momentum behind the move.
2.) Corrective move- “shorter leg” which is against the trend. Candlesticks are usually smaller
because of profit taking

Tip: you can trade pullback on corrective move and breakout on the impulse move.

4 stages of trend a serious trader must know:

1. Accumulation- usually occurs after a fall in prices and looks like a consolidation period.
Characteristics of accumulation phase:
 It usually occurs when prices have fallen over the last 6 months or more
 It looks like long period of consolidation during a downtrend
 The 200-day moving average tends to flatten out after a price decline
 Price tends to whip back and forth around the 200-day moving average
It looks something like this:

Stage 2: Advancing phase

After price breaks out of the accumulation phase, it goes into an advancing phase (an uptrend).
Characteristics of advancing phase:
 It usually occurs after price breaks out of accumulation phase
 Price forms a series of higher highs and higher lows
 Short term moving averages are above long-term moving averages (e.g. 50 above 200-
day ma)
 The 200-day moving average is pointing higher
 Price is above the 200-day moving average
It looks something like this…
Stage 3: Distribution phase
Distribution usually occurs after a rise in prices and looks like a consolidation period.
Characteristics of distribution phase:
 It usually occurs when prices have risen over the last 6 months or more
 It looks like long period of consolidation during an uptrend
 The 200-day moving average tends to flatten out after a price decline
 Price tends to whip back and forth around the 200-day moving average
It looks something like this:

Stage 4: Declining phase

After price breaks down of the distribution phase, it goes into a declining phase (a downtrend)
and consists of lower highs and lows.
This is the stage where traders who do not cut their loss become long-term investors.
Characteristics of declining phase:
 It usually occurs after price breaks out of distribution phase
 Price forms a series of lower highs and lower lows
 Short term moving averages are below long term moving averages (e.g. 50 below 200-
day ma)
 The 200-day moving average is pointing lower
  Price is below the 200-day moving average

It looks something like this…

So, you’ve learnt what are the 4 stages of the market, and the key characteristics to look out for.
Now, let’s move onto the next section…

How to read price action of any market and determine the strength:
1.) Slope of impulse moves get flatter
2.) Candlestick bodies getting smaller on impulse move

3.) Slope of corrective move getting steeper

4.) Candlestick bodies getting larger on corrective move

Examples for this concept:

#1

(a) Impulse move higher which looks normal in an uptrend. (b) Corrective move lower, but
candle bodies sizes are increasing compared to previous corrective move. This is something
unusual. (c) Impulse move which is short lived. Possible complex pullback setting up, (d)
Corrective move tested the previous low. (e) Impulse move higher which should lead to the
resumption of trend. (f) A false breakout. The corrective move has large bodied candles and is
getting steeper. This doesn’t look good. (g) A weak attempt by the bulls to regain control
The uptrend is getting weak. Support comes in around 175 which is a strong line of defence for
the bulls.I will look to long or stay on the sidelines. No shorting at this point.A break and close
below 175 would be bearish with the completion of a head & shoulders pattern. If it happens, I’ll
look to short or remain on the sidelines.
#2

(a) Impulse move lower with a huge spike down (possibly due to news event). Price continues
trading towards the low. (b) Corrective pullback with small bodied candles, which looks normal
in a downtrend. (c) Weak impulse move lower. Where did the sellers go? (d) Strong corrective
move higher with large bodied candles. The trend is possibly over and could transit into a range
market. (e) Sellers came in and tried to push price lower. If it breaks below the previous low, the
trend could resume. But it couldn’t. (f) Bulls taking control once more at attempt towards the
resistance area
Bulls and bears are in equilibrium at the moment as both bullish and bearish candles are of
similar size. I’ll look to short or stay on the side. No longs at this point. If price breaks above the
resistance area at 0.6900, then I’ll look for longs or stay on the side.
#3

(a) Impulse move higher which broke and close above resistance. Candle bodies are large
showing strong bullish momentum. Expecting the trend to continue. (b) False breakout as price
trades back into the range. Candle bodies are large showing strong bearish momentum. It
doesn’t look good here. The last line of defence comes in at 91.00 support area. (c) A weak
attempt by the bulls to push the price higher. The small bodied candles show the lack of
strength by the bulls. (d) Bears regain control and push price lower, breaking 91.00 support (this
is an impulse move lower). Large bodied candles show signs of strength by the bears. (e) A
weak attempt by the bulls to push the price higher. Again it shows lack of strength, with small
bodied candles and flatter slope. (f) One bearish candle wiped out the gains of the last 14
candles, with previous support turned resistance
The bears are clearly in control now and I’m looking to short or stay on the sides. No longs for
me at this point. For further readings, I would recommend the works of Lance Beggs. Now, let’s
move onto the topic of candlesticks…

Stop memorizing candlesticks patterns; you only need to these 4 things:

1. Wick
-Wick represents price rejection. Longer wick means greater price rejection.
-when you see a lot of wicks in a chart, you are in a choppy condition (range market); when you
get little to no wicks, you are in a clean condition and have a strong trending market.
2.) size of the body
-Easiest way to identify the momentum is the size of the body. A large body shows momentum
and vice versa.

Advanced candlestick knowledge:

1.) Pinbars- a reversal pattern

This does not mean that when we see a pinbar we expect the price to go lower. It is actually a
retracement within a trend.
-Do not “blindly” go short when you see a bearish Pinbar or go long when you see a
bullish Pinbar. Instead:
a.) In an uptrend, only trade bullish Pinbar at an area of support
b.) In a downtrend, only trade bearish Pinbar at an area of resistance

Video of rayner teo about trading pinbars : A pinbar trading strategy that works
-Trade with the trend: go long on bullish pinbars on a support in an uptrend or go short on
bearish pinbars on resistance in a downtrend
-Look for confluences like SR
-don’t just wait for the specific pinbar; look for other candlesticks that show rejection of prices as
this is the principle behind pinbars

2.) Engulfing patterns

-if you think about it, pinbars are actually Engulfing pattern on a lower timeframe

-Price rejection can come in many forms. You should focus on price, not the pattern.

Inside bar- is a continuation pattern with low volatility. Thus, you can get an entry with tight
stops on this pattern (and improve your risk to reward).

*In a choppy market, the lack of momentum usually results in many losses (so it’s best to avoid
choppy markets).
The best inside bar setup is when:
1.) Price breakouts from conso with strong momentum
2.) It’s a strong trending market (not choppy)
3.) Trading in the direction of the trend
example:

Another variation of the inside bar is the “fakey” by Nial Fuller. It’s when the Inside bar breaks
out in one direction, only to reverse and close in the opposite direction (otherwise known as a
false breakout).
3.) Rising three method
-This is a bullish trend continuation move, with three bearish candles as a retracement in
an existing trend. Then a bearish candle closes lower, signaling the bulls are back in control.

-The market has been in an uptrend. A long bullish candle forms. Followed by 2,3,4,or 5 small
candles consecutively getting lower. These small candles should not close below the low of the
long bullish candle or even the wicks.
4.) Falling three method
-This is a bearish trend continuation move, with three bullish candles as a retracement in an
existing trend. Then a bullish candle closes higher, signaling the bears are back in control.

-The market has been in a downtrend. A long black candle forms. It is then followed by a series
of small candles, each consecutively getting higher. The optimal number of up trending days
should be three. Again, two or four or five counter trend days can be observed. The important
factors are that they do not close above the open of the big black candles and that the shadows
do not go above the black candle's open. The final day of the formation should open down in the
body of the last uptrend day and close lower than the first big black candle's close.
-By waiting for these precise patterns to occur you will miss a lot of opportunities so just do the
variation of this pattern which is the flag or pennant formation.
3.) Fibonacci Retracement (video of FACTA)
Notes:
*try to use the standard levels: 38.2, 50, 61.8, and 161.8.

*How to draw the retracement levels (body to body or wick to wick)

-Don’t mix reference points
-Don’t ignore long term trends
-Don’t rely on fibo alone (use confluences and indicators)
-Don’t use fibo over short intervals

* When should you enter a trade

-high risk- When the price almost reaches 38.2% retracement
-medium risk- When price bounced from 61.8%
- When price breaks the 38.2% resistance
-low risk- When price broke out of recent high

*usually when fibo supports are broken, usually it will be retested and if the prices fail to break
the previous support turned resistance, it means momentum is getting lower and will eventually
fall.

*38.2 support is key and is a good area to take profits when the uptrend is correcting. If not,
expect a bounce from 61.8 which is the final warning.

*When bottom fishing or going long from a swing low, sell half of shares when it reaches
38.2% resistance. When is breaks the 61.8 resistance, it means the uptrend is really strong and
take profits on the extension levels, 161.8%.

*Volume is very important especially for breakout candles. A candle breaking out of 38.2%
resistance must have a volume bigger than the previous candle. Same as the candle breaking
out of 61.8% resistance. A breakout from 38.2 or 61.8 may fail if volume is low.
*hierarchy of timeframes: yearly > monthly> weekly> daily. This means that when we see that
for example, weekly is bearish while daily is bullish, it is a sign that daily will be bearish in the
future.

B. TRENDS

Video of money growers about ZS and AOTS

Nagpipivot na yung trend (down to uptrend) pag nag ZS na and lumalayo na yung prices sa 100
MA.

Trading with rayner blog: The pinbar trading strategy

3 biggest mistakes of trading pinbar strategy:

1.) Assuming the market will reverse because of a Pinbar

-so lesson learned is that trade pinbars that goes with the trend and not against the trend

2.) Giving too much attention to the pinbar

-pinbar represents price rejection and price rejection comes in several ways so you will lose a
lot of trading opportunities if you just rely on pinbars for price rejections. Instead, learn to read
price actions of market
3.) Treating all pinbars equally

-If you see strong momentum followed by a small bearish Pinbar, it’s likely to be a pause (as the
bulls are in control).

-And if you see weak momentum followed by a huge bearish Pinbar, it’s likely to be a reversal
(since the preceding price action tells you the bulls are getting weak).

How to improve your odds when trading pinbars

1.) Trading with the trend
By trading with the trend:
1. You do not require precise entry to make a profit
2. You have better odds for the trade to work out
3. You have a greater profit potential as the impulse move is stronger
2.) Trading from an area of value
-buy from support.
-Never buy somewhere where your RRR is bad or worse than 2:1 (preferable 3:1)
3.) Wait for a break of structure (on the lower timeframe)
-If you spot a bullish Pinbar, then wait for a higher high to form (on the lower timeframe). If you
spot a bearish Pinbar, wait for a lower low to form (on the lower timeframe).

By waiting for a break of structure on the lower timeframe (in this case a lower high and lower
low), you’re waiting for the price to confirm that sellers are in control before taking a short
position. And this increases the odds of the Pinbar working out.

The Pinbar trading strategy

-If 200ma is pointing higher and the price is above it, then it’s an uptrend (defining the trend).
-If it’s an uptrend, then wait for the price to come to your area of value (it could be SR or
dynamic SR).
-If the price comes to an area of value, then go long when you see a bullish Pinbar (or price
rejection).
-If you’re long, then place a stop loss below the low of Pinbar.
-If the price goes in your favor, then take profits at the nearest swing high.
Trading with rayner blog: The trend trading strategy guide

“An uptrend consists of higher highs and lows. And downtrend consists of lower highs and lows,
right? But… what if you get a chart that looks like this?”

“Is this an uptrend, range, or downtrend?”

-to know the trend use 200MA:
-If the price is above 200MA and 200MA is pointing higher, then it’s a long-term uptrend.
-If the price is below 200MA and 200MA is pointing lower, then it’s a long-term
downtrend.

*Skipped the video about identifying trends as it was only the same concept above.

Different trends can exist on different timeframes

-this means that a stock might be uptrend on one timeframe and opposite on another.
-solution to this is trade only using one timeframe.

Video of rayner: How to trade with multiple timeframes

-use factor of 4-6. So for example, lower timeframe is 4h and higher timeframe is daily or
15mins and 1hour.
-trade with the current swing on higher timeframe so this means trade the short trend and not
the whole picture (example is stock in daily timeframe is long-term downtrend but short-term
uptrend so trade it as an uptrend)
-enter based on lower timeframe and just use higher timeframe’s current swing as basis
whether to go long or short because remember the hierarchy of timeframes. Lower timeframes
follow higher timeframe.
Three types of trends every serious trader must know

1.) Strong trend

- In this type of trend, the buyers are in control with little selling pressure. You can expect this
type of trend to have shallow pullbacks —barely retracing beyond the 20MA. In some cases,
you will get no selling pressure as the trend goes parabolic
2.) Healthy trend
– In this type of trend, the buyers are still in control with the presence of selling pressure
(possibly due to traders taking profits, or traders looking to take counter-trend setups). You can
expect this type of trend to have a decent retracement usually towards the 50MA, which
provides an opportunity to hop on board the trend.
3.) Weak trend
– In this type of trend, both buyers and sellers are vying for control, with the buyers having a
slight advantage. You can expect the market to have steep pullbacks and tends to trade beyond
the 50MA.

What is the best time to enter a trend?

There are two ways to enter a trend, on a breakout or pullback. And the entry method you’re
going to use depends on the type of trend the market is in.

1.) Strong trend entry

-In a strong trend, the market has shallow retracements (not exceeding 20MA) which make it
difficult to enter on a pullback because the market hardly retraces and then continues pushing
higher. Thus the best way to trade this type of trend is on a breakout or, to find an entry on the
lower timeframe.
2.) Healthy trend entry
-In a healthy trend, the market has a decent retracement which makes it ideal to enter on a
pullback. However, you can also enter on a breakout. But you’ll have to “endure” the
retracement back towards 50MA (which drains your mental capital). Thus, a better entry is to
enter on a pullback.
3.) Weak trend entry
-In a weak trend, the market has steep retracement (usually exceeding 50MA) and it’s difficult to
“predict” where the retracement will end using MA. In a weak uptrend, the market tends to break
the highs only to retrace back much lower (which makes trading breakout difficult).Thus, the
best way to enter this type of trend is at Support and Resistance.
How to place stop loss or cut loss in a trending market

1.) Moving Average

-when price is respecting the MA20 or MA50, cut when it breaks it
2.) Structure
-in an uptrend, place stop loss below the previous low
3.) Trendline
a.) Draw trendlines by connecting the lows of an uptrend (and highs of a downtrend).
b.) Once you’ve identified the “barrier”, you can set your stop loss below the trendline (for
uptrends), and above the trendline (for downtrends).

Video of rayner: how to develop a trend trading strategy

-3 things you must have to succeed in the trading business
1.) Trading strategy with an edge
2.) Risk management
3.) Psychology/ discipline – most important!!!!!!!!!!!!!

Trend trading simple strategy

If the market (on the Daily timeframe) is a healthy trend, then wait for it to pullback towards
50MA.
If the market pullback towards 50MA, then wait for a candle to close in your favour
If the candle closes in your favour, then look to enter on next candle
If you enter on next candle, then set your stop loss 2ATR from entry
If stop loss is set, then look to take profit at the nearest swing high/low

Trading with rayner blog: The definitive guide to trading pullbacks and breakouts

Where does a pullback end?

1.) Towards resistance turned support
2.) Towards dynamic support
3.) Towards a fibo retracement

Should you wait for a confirmation candle of pullback?

1.) if yes, then you have a poor RRR since it is already farther away from where you expected it
to pull back
2.) if not, then it is a bit risky as it might lead to whipsaws

Trading pullbacks on uptrends example setup:

1.) Trend must be uptrend overall (100MA is below prices and is pointing up)
2.) wait for prices to pull back to a support then wait for a strong close
3.) enter on the next candle open
4.) exit on previous swing high

*Always look for confluences as it makes your trade have a higher chance of being successful.
You can look for:
1.) Trend line or trend
2.) SR
3.) MAs
4.) Multi-year high and lows
5.) Oscillators
6.) Candlestick patterns
How do you identify a potential breakout before it happens?
In a range market
1. Mark the highs and lows of the range
2. Pay attention if price trades beyond the highs/lows of the range

In an uptrend…
1. Identify a swing high
2. Pay attention if price trades above the swing high
Do you wait for a breakout confirmation candle?
For breakout trades, a confirmation would be a candle close beyond the highs/lows you’ve
identified.This depends entirely on your trading personality.

The secret to finding explosive breakouts

*The longer it is in range, the bigger it will trend later on
-so this means look for prices that are ranging and are consolidating within the swing highs as it
will potentially break that resistance

PART III: BUILDING A TRADING SYSTEM

Cosmos Kairos video about backtesting

-have a setup and backtest it on a number of stocks (the more the better)
-have a setup and backtest it and not the other way around
Trading with rayner blog: complete guide to becoming a consistently profitable trader

5 Step checklists:
1.) finding your trading style
-know the different approaches by different traders and choose one and learn everything about
it
2.) Develop trading plan
- it should cover risk management, entries, exits, markets traded, and time frame
3.) execute trading plan
- execute your plan and do not change it. Use law of large numbers when backtesting
4.) Record down trades
-use a journal
5.) Review trades
- after several trades, review your trades and if it turns out you have mostly negative results,
repeat steps 2 to 5.

Law of large numbers

-This means you need a large number of trades (at least a 100) for your “edge” to play out.

How do I develop a trading plan?

By answering these 7 questions:
1.) What is your timeframe?
2.) What markets are you trading?
-stocks, forex or etc?
3.) How much are you risking per trade?
-for starters, don’t risk or lose 1% of total port.
4.) Conditions of trading setups?
-You need to know the requirements of your trading setup. Whether you’ll trade with the trend,
within a range, or both (For starters I would suggest trading with the trend).
5.) How will you enter the trade?
- Breakout or pullback?
6.) Where is your stop loss?
7.) Where is your TP?
-What ZF does is sell half above on resistance then let the other half fly but still use TPs.

Record your trades and improve your trading performance

1.) Date – Date you entered your trade
2.) Time Frame – Time frame you entered on
3.) Setup – Trading setup that triggers your entry
4.) Market – Markets you’re trading
5.) Lot size – Size of your position
6.) Long/Short – Direction of your trade
7.) Tick value – Value per tick
8.) Price in – Price you entered
9.) Price out – Price you exited
10.) Stop loss – Price where you’ll exit when you’re wrong
11.) Profit & Loss in $ – Profit or loss from this trade
12.) Initial risk in $ – Nominal amount you’re risking
13.) Chart screenshot
-chart of higher timeframe (what the trend is, SR, structure of the markets like Cup and handle
or Head and shoulders)

-chart used to enter (setup, entry and exit)

-chart after trade is completed (did you follow plan, what’s profit/loss, how did you exit trade,
how to improve)
*if you review your trades and if you find out you had a bad performance fix it by:
1.) trading with the trend
-By trading with the trend, you’ll trade along the path of least resistance which will improve your
performance.
2.) set a proper stop loss
-You want to set your stop loss based on the structure of the markets and not the dollar amount
you’re willing to risk.
3.) Remove large losses
-You can do this by risking no more than 1% on each trade.

Rave Kairos’ blog about Trend following- reverse engineering ZF system (very juicy )

We use the ff:

1.) MAs
-20 (more of this), 50, 100 MAs.
2.) RSI in 14 period
- Where 30 is oversold and 70 is overbought
3.) Darvas Box techniques
-like 6mos high, 52 wk high, multi-yr high, and ATH resistances

Zee freak’s blog about TF- trend following astronaut

One must ask when doing TF:

1.) which lines are showing bullishness
2.) should you buy on ZS?
3.) should you buy on AOTS?
4.) where do you place your stops? 20, 50 or 100MA?

*ZF said that whenever he has stocks that are both on AOTS, he would put more volume on the
stock that broke a higher level of resistance as it would suggest a stronger trend
- ATH> 52wk> 6mos, and etc.
*ZF said it is okay if you don’t sell or take profits at the highs as long as you still gain and you
followed your plan!!!!!
*I also observed that he bought in tranches too when he did TF.

To put all into a simple criteria:

1. The stock must have broken-out of at least the 6 month resistance
All-time high > Multi-yr high > 52-week high > 6month high, and so on
2. AOTS formation in daily, more conviction if AOTS formed in weekly (longer timeframe)
3. SMA20 trail is being respected in the daily. Last resort, SMA50 is respected
4. Sell whenever SMA20 ‘snaps’ or when SMA50 snaps
Timeframe: Could take a month to 3 months to 1 semester to 1 year, and so on.
For example:

1. Plotted the All-time high (ATH) resistance at 14.18. Again this is the trigger point. A breakout
from these kinds of resistances will start the uptrend. $PXP broke out of this ATH on
04/24/2017. After which, followed by momentum candles with supported volume.
2. Month of May 2012 $PXP transitioned into AOTS. The price is > 20SMA > 50SMA >
100SMA. We can see here that the rally continued until July 2012. May 2012 was the start of
the uptrend.
3. Let’s take a look at the SMA20 (red line). Since the breakout from #1, the price respected
this line for 3 times and continued its rally.
4. As for the selling, 07/17/2012 $PXP broke down from SMA20. 07/19/2012 broke down from
SMA50. These are the areas where the trend weakens. There is RSI bearish divergence seen
from May 2012 to July 2012.
Easy way to spot a TF play
-“if a stock is above RSI70 in weekly chart and stayed above it for some time, automatic, the
daily chart is in AOTS. It’s in uptrend. A trend-following candidate.”

1.) $PXP ATH plotted at 14.18 – the trigger point

2.) End of week of 04/27/2012, ATH breakout at 14.18.
2a.) RSI breakout at 70 level.
-It is confirmed from daily chart that this is the start of the uptrend.
3.) End of week of 07/20/2012,
3a.) RSI breakdown at 70 level.
-It is confirmed from daily chart that this is the time when the trend weakens.
Another example with checking RSI on weekly then checking AOTS and MAs in daily with
stock STI:

Take a look at the weekly chart of $STI. MA’s are hidden so we can see the behavior of price
vs. RSI alone. The green line is the start of RSI70 breakout and red line is the breakdown at
RSI70. Plotted are the 52wk and 2yr high darvas resistances.

1.) This is the start of the uptrend. End of week of 10/14/2016, $STI broke out from its 52wk
high
1a.) RSI breakout at 70 level.
2.) After 5 weeks, end of week of 11/18/2016, $STI broke out from 2-yr high (multi-yr high)
2a.) Few weeks before that, it consolidated and RSI70 was retested then rally continued.
3.) This is where the trend ‘weakens’. End of week of 03/24/2017, RSI breakdown at 70 level.

Now moving on to daily chart of RSI…

There. From Oct 2016 to March 2017, the stock is already in AOTS. See how the price rallied?
It respected the SMA20 line for 5 times (1a to 1e). There was an instance start of March 2017,
the price visited the SMA50 and went above SMA20 line. This registered a Lower High (LH)
from Feb 2017’s recent high. It failed to recover above SMA20 in March 2017 that’s why April
2017, $STI started consolidating.

*What I observed about cosmos’ TF plays:

1.) First he plots the Darvas boss resistances that are soon to be broken.
2.) entry is when RSI breaks out in weekly chart and stays there for a while
3.) then proceeds to daily chart to check if stock is on an uptrend and is in AOTS formation. Also
check if weekly is on AOTS for more conviction
4.) then checks if the stock is respecting or using the MA 20 (preferable) or the MA 50 as a
support.
5.) exit once the prices break down from the MA20. Also since you are doing TFs where you
ride the highs and lows, always check if there is bearish divergence forming!

*Kidlat said to TF stocks only with high momentum.

PART IV: RISK MANAGEMENT

Money grower’s video: why loss works against us

*win big, win small, lose small, that’s it!

Money grower’s video: Risk reward ratio

*plot resistances and support from right to left

*generate trade ideas that are realistic and are not forced to satisfy the 2:1 or 3:1 RRR condition

Money Grower’s video: Set your stop

*place your stop loss in an area where you think your trade idea is invalidated. This means that
for example you are playing for a bounce and you bought EOD on first day candle of bounce,
the next candle should not reach the first day candle’s low.
*if your trade has a high risk, use small allocations.
ZF’s borg stop and trailing stop blog
*buy on breakout and set Trailing stops like closing price or high of previous long green candle,
or MA or fibo retracement.
*after selling, wait and expect a bounce in the following days (probably use fibo)
*SELL when stop is hit!!!!!!

ZF’s blog: What the FAQs: Cut vs Trail:

*he buys and sells in tranches to lessen impact on price swings --- do this especially if you have
a big volume
*When cutting he has 2 cut points:
1.) 2-3% range where I lighten up positions, and yes tax and commissions are included in this
computation
2.) the max cut point which is 5% which means that if my position reaches or falls below this
level, I cut ALL my positions regardless of the time of day - this rule applies to ALL my trade
setups.

*do not wait for the bounce or expect a bounce coz what if it doesn’t? always expect the worst
case scenario.
*3 types of Trail stop:
1.) MAs probably the MA20
-he only uses this if MA is already 10% from AEP. Do not use this if MA is the same or is less
than 10% gain from AEP.
2.) Darvas
3.) several flucs below previous closing price (prev close price is 19.2, so next day cut at 19.1)