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... STRAT
The STRAT Method | |||||||||||||||
What is #TheSTRATThe trader known as Rob Smith (@RobInTheBlack) on Twitter who has pioneered this trading method. He has concluded his trading method after participation in the market for more than 20 years. He operates a trading room at Ticker Tocker. He believes in eliminating market noise, and focuses on aspects that we can define, quantify, analyze and execute on. TheSTRAT is a form of charting method where one should analyze multiple timeframes. The charting method has three major elements; Major direction, candle analysis and conclusion of price direction. Bar Analysis seek out for a three major types of bars.
Candle analysis to seek out for a full time frame continuity or conflict. This helps traders to determine continuity, correction or start of the reversal. Major conclusion of the trading method is based on time frame continuity. Conclude direction of the current trend by looking at the direction of the higher time frame candles. Conclude support and resistance level based on the higher time frame's appreciation or rejection levels. Inside bar represents pause in the current trend. It could be the culprit behind major reversal. Outside bar represents a reason for future and immediate time frame broadening formation of price behavior. Directional bar indicates continuation of price movement in a same direction. Having said that, one should look out for how and where it closes in the major timeframe and how the shorter or immediate time frame trend is adapting the price action. Over all, this fits in with the lucid-trend methodology of ripple effects created by the water drops. That's how the trends are initiated and continued on till they reverse! Major Principle of TheSTRATThe pillars of Rob's strategy are simple1) Time Frame Continuity 2) Broadening Formations 3) Inside Bars These principles are not in order of importance. The each principle has equal value within Rob's strategy. In order to identify high probability, low risk/high reward trade set-ups, it is imperative that we evaluate a stock (or any security, for that matter) in the context of these three principles. The psychology of TheSTRATTime Frame ContinuityWhen we discuss time frame continuity, Rob prefers to evaluate a stock in terms of the four major time frames as follows:
The purpose of this exercise is to identify who is active and in control in the market, whether buyers or sellers in a given time frame. Ideally, we want to identify stocks that are moving in the same direction on all of these time frames. In other words, the best opportunities tend to lie in stocks that are trading above the opening price registered on the current monthly, weekly and daily candlestick. If a stock is above all of these opening prices, we consider this stock to be in full time frame continuity to the upside. Buyers are firmly in control of this stock, and we should look for opportunities to enter long position. The converse can be said for the downside: when a stock is trading below the opening price of the current monthly, weekly, daily bar, we consider the stock to be in full time frame continuity to the downside. Broadening FormationWhile many traders will talk about stocks making higher lows and lower highs, one thing that Rob has identified in his years of studying charts every night is that securities will always trade in a series of higher highs and lower lows. Even if a stock is in a steady uptrend from, say, $80 to $100, somewhere along the way that stock will make a series of higher highs and lower lows on some time frame. While this may seem irrational, it helps to analyze this statement from the perspective of supply and demand. When a stock reaches a new high, it means that a new group of buyers have been identified above the previous high. Eventually, that buying pressure exhausts, and the stock retreats. This new group of buyers becomes trapped, and this will create pressure to the downside, either on a short-term time frame or a long-term time frame. Inevitably, the stock will eventually get pushed towards a previous low, whether it's a recent low on a 15 minute chart or a major inflection point on a monthly chart. As the stock pushes towards this low, those buyers at highs will succumb to the selling pressure, drive the stock to a new low that is bought up by the sideline traders or natural buyers, and the stock will resume higher until it reaches the next new high. This series repeats itself, which creates a formation that can be fit into a triangle. Inside BarsThe first two principles are crucial in terms of understanding whether we should be looking for long or short opportunities. When a stock is near the bottom of a broadening formation and above the opening prices on the major time frames, we know that there is a possibility that all sellers who wish to sell have executed their orders, and the stock could resume upwards. In order to initiate a position in a stock, we look for inside bars. The inside bar is simple. The current bar is within previous bar's high and low prices. These bars represent an equilibrium in trading: neither buyers nor sellers are in control of the stock, but a resolution is coming. We can look to initiate a position when that equilibrium breaks. In other words, when Now, once we have an inside bar, we are looking for which way the prices are breached, we can look to buy, and vice-versa on the downside. When game planning for a particular day, one should start by looking at stocks that have put in inside days, meaning the day's high and low price are entirely within the previous day's trading range and make your call based on which way it breaches with candle continuity. On a shorter time frame you will see far too many inside bars are created. As you move your focus to larger time frame they appear less and less. How one should translate and act?You should consider this strategy as a ripple effect in a water, how the trends are initiated and followed as a wave and impacting the larger time frame as they travel outwards. If they carry on to affect larger time frame it becomes time frame continuation and if they fail they become reversal. How one should trade?First thing first, define your time frame to trade or invest, once you have done that, lets examine the individual bar characteristics and that will help you determine with the followings; Is this a good setup I should be participating with? If I am wrong what price level I should be getting out of this position. How one should exit out?If the stock makes parabolic move, you may wish to capture gains and lock in your profit by considering exit from your position on a trend and characteristic of immediate time frame otherwise continue holding it till the trend dies down with your initiated time frame. Variation of trading methods.You can initiate a position based on the largest time frame and keep adding as price moves as you anticipated or you can a take a full position based on your selected time frame. What we have to offer;Market scan based on the TheSTRATMultiple Time Frame charts based on the TheSTRATTrade Plan based on the multiple time frame of TheSTRAT |
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represents Accidental bull breakout also referred to as New Sun.
represents Bull run
represents Bull Breakout also referred to as an Emerging Sun
