High Probability Trading Strategy || Favorite Setup📈

welcome to my channel everyone thanks for tuning in to this video where i'm gonna break down a really high probability trading strategy that i use and personally it's one of my favorite you know trading strategies now i usually save content like this for video lessons in the course and there is a more in-depth lesson about this strategy in the course um but i decided to just drop this on my youtube for all my followers just as an appreciation post i've been getting a lot of you know kind words nice messages about people using the strategy and making money and it really makes me happy showing my effort and my hard work you know into these videos is paying off for all you you're all making money and you're all learning about trading you know the right ways to do it now in this video i'm gonna break down the mechanics of the strategy i'm also going to show you what i look for what to look for and how to trade it once you see this pattern is forming on a chart it's going to be a really good video so make sure you stick around and before we do begin if you enjoy this video if you learn anything from it all i could ask is you to drop a like on it subscribe to my channel and if you aren't already following my instagram i'm gonna link this in the description below it's a very good page i post daily trading recaps and i post really good trading and options tips and tricks so without further ado let's get right into the strategy so it's really important for all you to understand the backbone to the strategy to understand the mechanics of it why it forms how it forms and basically the auction process of the market because if you understand that you're going to get a better understanding of how we can capitalize on this strategy and take really nice high probability trades to the upside so the first thing that i look for is a very strong move with very eager and willing buyers to the upside so i want to see on a candle chart a very strong green candle to the upside now it's important to note here that this strategy i only use on a five minute chart so make sure you're looking at a five minute this structure forms on other time frames but for this strategy i only care about a five minute and i'm only using it as a scalping strategy and you're going to see examples on a real chart in a couple minutes here but first we have to understand the backbones and the cell the skeleton side to this strategy so it's important for a very strong green candle to the upside because what this means is very eager and willing buyers to attract prices to the upside basically what causes this strong rally to the upside is a couple things it's not eager sellers so basically there's a light wall for buyers to break through or you could have very willing and eager buyers that want to rally price and basically they remove liquidity from the market they hit the market price on the offer and they drive price higher so it's important for this first candle for it to close near its highs or attitudes you can have a wick but make sure the wick is a smaller wick versus um with a larger body versus a large wick with a small body you want to see the participants to the upside drive price high and close near the high if the candle is you know body like this and there's a long upper wick like this then i'm pretty pretty much not going to look at the candle i want to find something that looks just like um this first candle that i drew here so once we have that candle form now it's important for us to wait for the next candle to form so you want something to form like this where it is a red basin candle now basically this strategy is speculating that new demand is going to form and basically the auction process to this what it really means the backbone to the strategy is price rallied high with eager buyers and then guess what happened we stalled out now why did we stall out couple reasons so these eager buyers that were buying on this candle right here they could have stopped hitting the market and they could have waited for price to come lower for them to basically leverage in their position and that's exactly why we want to see a red candle now here now it's important for this red candle to be a small bodied candle because that is going to be basically a basing candle on a five-minute chart and we want price to be read because we want the market to start coming down when the market starts coming down and we have basically the market holding up you have strong buyers now sitting on the bid leveraging their position so they could be a little more passive without rallying the market if buyers wanted to get into the market right now they would have to hit the ask hit the offer and what that would cause is price to start rallying to the upside so what they do for a little more passively is that they sit on the bid they wait to buy passively and you have price coming down where you have market participants selling into their buy orders which causes a strong valid basing red candle right here and another thing is too is you could have strong sellers so what they do is it's a big auction game it's just to trick market participants in one side and then the other side gets you know scared they lose on the trade and someone's gain is from someone else's pain so what happens here also is you could have a really strong seller sitting on the offer a thousand lots 1500 lots and what that's going to show is is a wall of sellers but that could be a something called a spoofing order so it makes it seem like there's a big wall sitting on the offer and price is not going to be able to get above that price but with reality what that is is a very strong buyer who is sitting on the offer to scare retail traders to sell the market and him sitting on the offer he's also buying on the bid from retail traders and from other people selling into his buy order so that's what causes this basin candle and now this is what's important here you don't want to get into this basin candle actually the beauty to this strategy is you could really customize it to your liking i'm just going to show you what i do and what i wait for but once we have this set up like this now you want to see the next candle become a green candle and you want to see a nice strong move to the upside what this is going to signify is this is going to speculate that this candle right here this red candle basically is forming new demand to the upside they're leveraging their position for another valley to the upside that did not get filled on the first green rally to the upside which caused the first strong aggressive by move so now we have a strong move and what i do is i take it long over the valley candle to the first one or the basin candle so like i said it's very customizable the strategy you could combine it with another indicator you use personally i just use price action you know like i said very customizable um and then what i do is i put my stop loss below the basing candle so it's a very small risk very high reward it works out a decent um percentage of the time let me just remove these lines but this is the structure that i look for we move up we base out and then we move up again speculating that demand is going to form and this really works and it's a very powerful strategy and once we get a quick move to the upside i sell my position i sell 50 to 75 percent of my position and now i play with house money i bump my stop up higher and now it's basically a free trade once we get a quick move to the upside now we're going to hop into the charts here i'm going to show you a real example how i trade it and what i look for on a couple charts so here's an example on alibaba and this is the exact candle structure that we look for we get a nice strong move to the upside you have eager and willing buyers then price bases out this red candle you want to act you want it to act like a hot dog you want it to be sandwiched in between the first one and then the next candle after the fact it happens you want to have a nice strong rally to the upside so this is what it's going to look like as it forms in real time once i see something like this form in real time i get my order ready to go which i'm going to show you how to do at the end of this video and i'm ready to purchase this once we break above this high putting my stop below the low so really i'm risking about 60 cents and then once i get about 10 20 cents on the option contracts you know i'm risking 60 cents on the stock when i get about 10 20 30 cents on the option contracts if we get a strong aggressive move to the upside what i'm doing is selling 75 percent of my position 50 of my position and when we get that move up now i'm boosting my mental stop loss a little higher you know maybe to above the high of the previous um strong candle to the upside now it's really not at the low or the basing it's really at the high so it's very customizable i want you to all to experiment with it test it out maybe combine it with another strategy you use but this is exactly what i do and majority of the time i want to say about 80 90 of the time i could easily get 15 20 30 cents on the option contracts and then i scale out and i play with house money i'm going to show you another example on baba on september 30th which is this candle right here so again market opened at 283 rally to 288 so about a five point rally and what this is telling me is we have very eager and aggressive buyers that are hitting the market and driving price higher with no true aggressive sellers then the market bases out these orders that could not have got filled on this rally to the upside because of the removal of liquidity now have to get filled for another leg higher so what happens the price starts stalling out you have an equilibrium between buyers and sellers basically equal buyers and equal sellers you have buyers sitting on the bid leveraging in their position you're not going to be able to see the orders um and then price starts rallying to the upside and the people that got long on this candle right here now are happy and the people that got long on this candle right here are now happy as well once price starts ripping to the upside so you could have taken this long around 288 and then this thing started rallying to 292. obviously i'm scalping the strategy i'm just trying to get a couple cents out and i'm happy you know you're not holding these for day-long trends you're just trying to scalp a couple cents and call it a day call it a treat um you know boost your stop-up along the way okay so here's a real example on apple now this we have a long lower wick and that's fine because the long lower wick signifies very strong eager and willing buyers price came all the way down to 103 bounced all the way up closed almost near the highs um which indicates that these buyers are very strong to drive price from all the way lower to all the way up to near the highs now this is an acceptable wick you know i want to say a rule of thumb is about 75 of the candle but here we go we have a nice move rally to the upside and now we're starting to trade sideways we have that equilibrium between buyers and sellers so once i see this start forming in real time this setup on apple right here what i do is i go to the option chain and i look at the contracts that i'm ready to trade so in this case my criteria um if you've been watching my videos with the delta the volume and the open interest pretty much if i'm scalping i'm going to trade these at the money i'm going to copy the contracts and i'm going to paste them into my active trader getting ready to purchase them once we come above the 105 34 area so let me play this replay a little bit show you what price looks like and as soon as we break the highs um we're trading it on demand right now so it's hard it's going to be very delayed the data but in real time it's going to look a little differently um so now really pretty much what i'm doing is waiting for a move above this a full five minute period was a strong inside candle from this apple zone now it doesn't have to be really be an inside candle but you just want it to be a bodied small bodied basin candle on the stock after a nice aggressive move up to the upside if this candle starts turning green i'm not taking this trade it has to be a red candle for me and it has to look exactly like that example that i showed you before so again we're just waiting we have the option ready to go and we're waiting for a nice move to the upside indicating and speculating that this is new demand forming on apple i'm ready to pull the trigger and like i said i'm just scalping for a couple of points starts moving up like this you start seeing volume coming in you start seeing a lot of tickets come through volume increasing and market participants are ready to push price higher then go ahead get ready to enter the trade um let's see what happens in the next couple of seconds we're gonna push and now i'm in you know 10 contracts obviously i'm trading on demand right now so the spreads and the fills are going to be a little bit differently but once we get a quick push-up like i said i'm selling 75 of my position i'm not gonna make you all sit through this this trade so i'm just gonna fast forward it and show you what it looks like so here we go i'm gonna maximize this and this is the exact same structure that we looked for we had a nice move a base and then a nice move higher you take it above the high and then this thing rallied the five minute candle after rallied about a full dollar so you could get a full dollar out of this move and no reason to sell the market didn't start coming down it's just a very high probability trading strategy now if i go to netflix on june 9th you're going to see the same exact thing whoa it's apple it's before split so here we have netflix and you're gonna see the same exact thing now the basin candle the wick is higher than the previous candle there's no real exact rules to it the fact is that the market balanced out you have the equilibrium you're speculating that demand is going to form and you take the move to the upside so those are four examples that i just showed you on the candle structure that i look for it's a very high probability strategy what i've noticed is when the basing wick is high higher than the green candle and we're pretty high up the trade is a little lower probability the highest probability is when it's sandwiched inside the previous candle but there's no reason not to take this trade because it it works decent amount of the time if the trade does go against you what i would recommend is as soon as we break above that high if it starts failing and starts coming down just exit the trade take a small loss it's it's it's better to do that than to be hopeful that it's gonna come back around and start reversing um i've noticed that once we break above the high and we fail immediately usually the trend starts reversing and we start coming down to the downside so i hope you all learned something from this video practice the strategy first back test it journal the trades and then use real money do not hop in blind you have to see how this matches up with your personality with your trading style and i just explained what i do personally so if you like this video drop that like comment if you learned something subscribe and also follow me on instagram thanks i would appreciate it

Channel: Carmine Rosato

Views: 31,923

Rating: 4.9534636 out of 5

Keywords: carmine rosato, supply and demand, ricky gutierrez, learn plan profit, ross cameron, warrior trading, tim sykes, day trading, stocks, stock market, thinkorswim, tdameritrade, trading setups, trading for beginners, options, options trading, trading strategy

Id: cg2hJ1x__EE

Length: 15min 10sec (910 seconds)

Published: Fri Oct 09 2020