the Cake Recipe

This thread is for the guy that has been struggling his tail off, doing everything he reads and yet finds himself completely frustrated because he isn't gaining 20% per day. Nothing seems to work. Well, this one does.

If you want to day trade and are sick of the lies and complex formulas that don't work, read on. Put the indicators to use and practice daily by reading charts until you can SEE what is gonna happen

(btw, if you trade options this will work even better as far as profit/returns go.)


Key to this Simple Formula:

1. your daily chart determines your primary action of whether to go long or short...it tells you what to do.

2. your intraday chart determines when you do it.


Indicators you will use for your Daily chart:

1. Bollinger Bands (set at 12, 1.5)

2. Slow Stochastics (set at 5,3)


Indicators you will use for your Intraday chart, 30 minutes and 15 minutes:

1. Bollinger Bands (set at 12, 1.5)

2. Slow Stochastics (set at 5,3)

3. MACD (set at 7,4,9)


Reading a Daily Chart

Your ability to read a daily chart is invaluable. Understanding certain types of candles will tell you whether the market is weakening/strengthening.

Enter the Bollinger Band...the Bollinger Band (from here on will be known as the BB) determines quickly when a stock is overbought or oversold. In a choppy market it will climb, touch the upper band and then drop. The settings I use are more aggressive but are common. Set them at 12 and 1.5...put them on your favorite stock and have a look back over time - VERY effective.

Slow (or Full) Stochastics work extremely well with BB. Sometimes you will see a stock "ride the band" and never reverse. Well, the Stochastics will tell you if the stocks current trend is weak. Sure it will easily tell you if the stock is overbought/sold but you need for it do something else...to tell you if the BB signal is gonna reverse of "ride the band". This indicator compliments the BB.

The settings I use are more aggressive but are common. Set them at 5 and 3 (or 5,3,3 for Full Stochastics). The thing you will like the most though is when the stock price is climbing but you see the Stochastics begin to angle down, creating a price divergence. That means the stocks price trend is weak and getting ready to tank. The reverse is also true.

Here's an example (I apologize for not being able to annotate on the chart) so you can see the importance of reading a chart...a simple chart.



November 28th the market took off! What were your 3 warning signs before it happened?

1. it had been sliding down the BB and was due for a reversal eventually (but when?)

2. Stochastics told you it was EXTREMELY oversold and would reverse (but when?)

3. Novemberr 24th...an inverted hammer..that was your key to going long so the daily chart told you WHAT to do.

Let's look at a complicated one...on the same chart:

December 1st it gave us a little hammer (indecision but not touching the BB), December 2nd it gave us a gravestone doji (MAJOR red flag but needs the next day to confirm a reversal). Those two candles told us it was gonna tank, but when?

1. the gravestone touched the upper BB on Dec 2nd but then we had 3 candles "ride the band" briefly, but only their wicks, not their bodies. It would end but when?

2. Stochastics told us the market was overbought but from Dec 5 - 7th the Stochastics declined while the stock rose in price...that's a divergence. The stock will go where the Stochastics is pointing in the case of a divergence, in this case, it was gonna go down.

3. Dec 7th candle body wasn't touching the upper BB and was pulling away. It was telling you WHAT to do...go short.


Now, just to see if anyone is serious. What is the stock telling us to do on January 5th?


That's it for the Daily chart...intraday is in the next post tomorrow night.

Hope you liked that part so far.

Okay fellas, I'm back.

You can use this technique 5 days a week.

Assuming you're comfortable with the daily chart (and if you are not then pick a site that teaches you candles so you can quickly refer to it when needed), we will now transfer that same awareness to your intraday charting.

Go to your personal intraday chart and add the settings listed above.

Here is where most people have difficulty in day trading...timing. Confusion reigns in day trading information but to be good, you need to keep it simple.

After you have looked at your daily chart and decided where the stock is gonna go, that should be your primary play. For this example, we are gonna pretend to be going long.

When we click on our (intraday from here on) 30 minute chart, we have just zoomed in to see more detail...only use your 30 minute chart with a 5 day time period for looking at the trends...do NOT trade off of it unless you are swing trading and just looking for the lowest entry. But not for day trading.

Then we zoom in even more for our 15 minute chart, using a 2 day time period...again for trend recognition primarily but some men will trade using this timeframe and that's okay. If you are one of them, please understand that a movement can carry over into the next day so you could be holding a position overnight in order to maximize your returns. Pretty risky but when you zoom out to a 5 day timer period (on the 15 min chart) you can see how the Stochastics will roll from one trading day to the next.

The Bread and Butter - this is where you will make money

The 5 minute chart is the supreme day trader timeframe because you can see the trends easily without getting into false moves, wasting your capital.

The Bollinger Band (BB set at @ 12 and 1.5) is gonna be your #1 tool. Most won't believe me but when you slap it on a 5 minute chart, YOU are gonna FREAK out after I tell you what to look for. And none of this is new information as there are many excellent threads on this board...they just get a little too complicated. Gotta keep it easy to understand.

For our exercise, we are going long with the strength of the daily chart...here we go. And I apologize if you are let down on how simple this BIG MYSTERY has been for you...but it is this simple.

The market opens and the bears tank the open, the stock starts declining rapidly. The candles are descending along the lower BB. Then, after about 20 minutes to an hour (that time fluctuates everyday) the stock will begin to reverse. Your MACD histogram will begin to ascend to the zero line preparing itself to flip over the zero line.


Once the stock begins to climb, let it climb to the upper band and hit it. Then let it retrace back down. If it does not go below the moving average (the middle line in a BB).....BUY!!!

This then becomes very, very similar to hunters thread on the 315 moving average except that you will be letting your stock climb on a 5 minute chart for the next 1 to 3 hours.

Close your position when the stock retraces back through the middle line, your stock has peaked.

(What were the Stochastics and MACD for with the 5 minute chart? Just to confirm you are not crazy and are really seeing what you think is about to happen.)

This little cake recipe is a serious money maker.


:clap:

Hi,

Pl elaborate this by giving an example & screen shots pls.....seems to be nice cake recipe indeed...thanks !

Fantastic thread by OCD!! Till now, I was very confused on using the intraday chart settings to ride the trend. There were many threads but as OCD said it was very confusing. But, OCD made everything easy!! This is truly a new year gift for a day trader from OCD. Fantastic effort and explanation. I sincerely request OCD to continue posting in this thread with invaluable suggestions and more explanation on what has been already said. Illustrations with charts will be still better (as Amit suggested). I request all beginners to visit this thread and encourage OCD to provide some more inputs on this simple money making thread. Please continue posting OCD. This is my humble request on behalf of all new beginners in day trading. Thank you very much