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Price action trading
You've probably heard of this trading term many times.
There are all kinds of videos on YouTube
that claims to be explaining the secret
of how to trade price action.
But here's the truth.
Most of them never talk about
what you, as a trader, should be careful of.
Any false breakouts or breakdowns
that you need to be aware of
for any kind of trading strategies.
Because there's no such thing
as a guaranteed profitable price action.
And don't you just hate it
when you don't receive any actionable tips
after watching a 20-minute long video?
So here you go!
I'm giving you three golden tips for price action trading.
Look out for candlestick wicks
when trading breakouts or breakdown,
The golden reversal time,
and how to know the frontside and the backside of the move.
And one bonus tip on technical analysis
if you stay till the end of the video.
If you've been watching my videos for a while,
you guys know that I'm never afraid to share tips
that can really improve your trading.
So if you're new,
oh, you have to get used to my bad jokes,
my annoying accent,
and remember to smash the Like button and subscribe.
Price Action refers to the rhythm
a stock moves up and down in prices.
Understanding price action is very important,
especially if you're trading short-term,
or any momentum or scalping.
Shh, and also, understanding price action
and risk management are the two very important milestones
that really helped me become profitable
while I was brand new to day trading.
Price action tip number one,
look out for candlestick wicks on the top and bottom
when trading breakouts and breakdowns.
So when looking at a daily chart for BBBY here,
you can see that on the daily,
before this huge breakout,
you see these candlesticks here
that has these long vertical lines at the bottom.
Here, here, and here on these couple of days.
Now, this is what we call a lower candlestick wick.
When you see candlestick wicks at the bottom,
that means the weakness on the stock
is getting bought back up.
What does that mean?
That means a lot of retail traders,
you know, people on social media,
and including Ryan Cohen,
they think the stock is really cheap
so they wanna buy it for a breakout.
So if you'd also draw a trend line at the bottom
of the daily,
you can see that these wicks,
they actually create higher lows.
Meaning that the bottom of the wick on each daily candle
is higher than the one before.
And that's technically bullish.
As you can see, the stock is getting bought up
around nine and $10 area for a couple more days.
And that's what led to the next breakout
on high volume, right?
You need people buying up the weakness,
so load up on the stock.
And that's where a lot of times
when you see these lower wicks on the daily,
this is possible to lead to a giant breakout such as BBBY.
Now, after the breakouts from around $11
all the way to almost 28, $30,
you see on this vertical wick on the candlestick,
on the top, this time around here.
Now, if we look at the daily,
this huge breakout with almost 400 million volume day
is this intraday chart right here.
You can see this wick around $28 area,
if we draw the line here, 28s here.
That's also the higher day for this giant breakout day.
You can see on this day,
when the stock held a breakout for,
throughout the entire day, pretty much.
And then it dumped from 26 to all the way to $19
at the end of the day.
This kind of dump is what created this wick on the daily.
And this is technically bearish.
So this is the opposite of what we just talked about.
Wicks at the bottom here, on the daily,
means the stock is getting bought back up,
and it's setting up for a big breakout.
However, when you have broken out on the daily,
but you end up with a wick like this,
a giant end of the day sell-off from 28 to 19,
this is technically bearish.
And a lot of times,
you're gonna see this retest of the breakout level
the next day.
Now, moving on to the second day of the breakout,
you can see this $28 line here, right?
We know that that's gonna be the resistance
from the day before.
And if you draw this line around across,
you can see that's the same area
that's being tested at the open.
However, we're looking at intraday chart here now.
You can see another wick here
on the first five-minute candle of the open.
Another wick here,
that means the stock actually, no,
successfully broke out within the first five minute.
However, you end up with a wick.
that means the stock broke out from 28 to $30
that you can see here,
but is unable to sustain the breakout.
Now, why does that happen?
And this is really why price action is so important.
When you see this kind of false breakout,
that means, first, it's a short sellers getting squeezed.
And unfortunately, for this stock, BBBY,
once you worked out the short sellers,
there's no real buyers coming in to buy the stock, right?
If you think about it,
if these actual buyers buying above 28, $29,
then the stock should be holding really well
above the $28 breakout point.
So that's why you really need to look out
for these intraday wicks,
especially when they line up
with a daily wick from the day before.
So that's the reason after multiple attempts
to break through that $28 area,
once that it opened,
and once again, around 10 o'clock,
the stock was still unable to hold above 28,
and it ultimately unwinded to the downside.
And this kind of price action on the candlestick wicks
on top and bottom is especially true on meme stocks,
because they are really socially driven.
Meaning that all the buying interests
are mostly from the retail traders.
And I think we all know by now the retail traders
are the most emotional traders out there.
And you can see the same thing on AMC,
one of my favorite stocks to trade.
Wicks on the top,
you can see eventually led to the unwind.
Especially when you see multiple wicks like this,
that's testing the same area.
Multiple wicks on this day here with the BBBY breakout,
and once again, for couple more days following.
When you see wicks reattempting to breakout once again
and failing to breakout,
that's ultimately going to lead to unwind to the downside.
I have a little challenge for you, guys.
Comment down below with a recent stock that you traded.
Whether it's a meme stock,
or a stock like Tesla,
and apply the price action for the candlestick wicks
that you just learned.
So find the time period on your chart
and let me know what you find.
Then go back test on the daily chart
with a price action tip you just learned.
And let me know what you find on your stock
in the common section below,
Moving on to price action tip number two,
the golden reversal time.
So this used to happen a lot when I was brand new.
I would have a stock that I'm watching,
for example, AMC here.
You can see at the open is dumped from $24
all the way to 23.
And I take it off my watch list,
and only later to see a bounce
from 23 all the way to 24, almost $25.
And that's because a lot of times,
when stocks sell off from the open,
there's that golden reversal time around 10:30
to 11 o'clock market time
that the stock will bounce.
So this is a perfect example here.
AMC here, on this day sold off from 24 to 23.
Now, if you look at the bottom around 10 o'clock
to 10:30s area,
that's when the stock started bouncing.
And this is a very decent bounce from 23.10s
all the way to almost 24.50.
So we're talking about $1 bounce here.
And so this very simple reversal bounce strategy
is what I used to trade part-time before I went to work.
This is like almost seven, eight years ago.
And remember what we learned in tip number one
with the candlestick wicks at the bottom?
If you draw this line around the $23 area,
around 10, 10:30,
this is also matches with a daily chart
where all the wicks at the bottoms are.
So when you have multiple factors lined up
for a bullish move reversal to the upside
such as 10:30 reversal time
that we talked about in tip number one,
the bottom wick on the daily chart,
then this is worth for a bounce on the long side.
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Now, back to price action.
Price action tip number three,
understanding frontside and backside of the move.
This tip is very important
if you're trading small-cap stocks,
especially those low float runners such as MEGL.
And whether you are usually long biased and short biased
on these small-caps,
you definitely wanna learn this.
This is a daily chart of MEGL.
This is a very low float stock.
As you can see,
it recent IPO'd around $50
with all the way to over $200,
and sold out from $200 down to now 12, 10, and $9.
This is a true piece of (beep) stock
that a lot of times can actually create
a lot of momentum to the upside.
So on these kind of small-cap sell offs,
a lot of time you get a giant day with a lot of volume
such as this one, 75 million volume traded.
And this is what we call the first green day.
This is a day where the stock went from $10 to $18 breakout.
And this is the day we're talking about.
On this day, the stock,
so I have a small-cap up pre-market
and consolidated around this area here.
You can see that matches with a daily support
and actually broke out to $18
to a close of almost 19, $21 after hours.
Now, if you zoom out on the five-minute charts,
which is what I like to do,
if you draw a simple trend line here,
if I draw it from the lows from the first day,
first green day of the breakout,
and all the way through matching the lows
and all the support intraday near power hour
through the pre-market area over here,
you can see this is a giant trend line to the upside.
And the high of the pre,
after hours is around,
let's just go at $22 here.
Now, a lot of times,
the frontside of the move
is if the stock continues to hold this trend line here.
So, technically speaking,
if the stock is going to continue breaking out,
holding the frontside of the breakout,
then on this second day here,
it really needs to hold above the $20,
$21, and ideally over the higher day from after hours.
So it really needs to hold at 22s.
So if you're long biased,
that's what you wanna look out for.
You wanna see the stock holding this giant trend line
to continue the breakout, so higher.
On the daily, if this thing had held,
it has upside above 22,
now all the way to 30, $40 and above.
But if you're long already,
it's really important to watch out
if the stock breaks down that trend line we talked about.
You can see on this day the stock had a false breakout,
another wick again,
on the breakout in the morning, around 22s,
and rejected and breakdown below 20s and went to $19.
Now, it's actually really common for these small-cap,
low floats, volatile stocks to break out and break down.
But if it stays below this trend line,
usually, I look at after 20 minutes or so,
if it stay below this,
then that means the frontside of the move
is broken, it's over.
And what follows is usually the backside.
But if you are short biased,
like I did on this MEGL chart,
this is what I look for.
This is a kinda signal that tells me
to get in for short entry on the stock.
So that's why you can see here,
once this MEGL broke down the frontside
and started forming lower highs, $20 rejection,
that's when you sold off all the way to $14 over here.
And if you look at $14,
this is a day of the prior day support
that led to the breakout into the close
and into the after hours breakout.
So that's why it's, you know, get a pretty decent move.
We're talking about $20 all the way to $14.
And then in the next couple of days,
if you zoom out,
you can see it gave back everything,
all the way down to $10 where it came from.
Now, if you stay through all these three price action tips,
first of all, thank you for staying with me so far.
And here's the bonus tip I have for you,
especially if you are relatively new.
We all know that technical analysis
and support and resistance is crucial to trading.
However, as traders, we need to understand
that support and resistance,
they can be subjective.
So for example, if I was a long biased trader,
I'm looking at this green line here, 24, 60 support.
Like we said, long wicks
at the bottom of the candlesticks intraday.
So I see the support and I wanna be able to just bounce it
for $1, $2 towards the resistance around $28.
So I will loan the stock for a quick scalp essentially.
This is a trade where if I got in here,
I would be really quickly selling
into these wicks year, 26 and 28, if we get there.
So all I'm looking for is a $2 bounce.
I can be very bullish
and my time horizon is only about 10 minutes.
However, another trader who's more short biased
can be looking at the same chart
and see a short play to the downside.
Like we said, when the stock rejected at $28 here,
daily wick here, 28s,
and also intraday wicks,
this red line,
then this short seller may wanna swing it
for a couple of days looking to swing it all the way
to a downside from 28 to maybe 23, $20 and below to $11.
Both of these thesis are valid.
So that's why it's important to form your own trading plan
with a expected time horizon and stick with your plan
using your own technical analysis
and price action to help you out.
So that's a reason I always stress on this channel,
do not follow chatroom alerts,
or livestream trading, or copy trading,
because they simply do not know the person's trading plan
or time horizon.
I wanna thank you and everyone who subscribed
for 900,000 subscribers.
We never could have gotten here without your support.
So that's the reason I wanna be doing
a 900,000 subscriber giveaway.
To win these "Humbled Trader" merch,
make sure you are subscribed,
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and comment down below which one
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Share with your friends on Facebook and Instagram,
and I'll pick five lucky winners in my next video.
Hopefully, these price action tips
can really help you out when you are day trading.
If you enjoyed this video,
please remember to drop a like and subscribe
if you want to see more.
And if you want to see these price action tips play out
during my live trading,
then feel free to check out this video with my commentary.
If you're interested in trading with me
and learning my trading strategies,
then feel free to check out
the "Humbled Trader" community down below.
Thank you guys so much for watching as always.
I'm the "Humbled Trader,"
and I'll see you guys next time.
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