hey guys Jared Wesley of live traders here I hope everybody is well I have two things that I want to go over with you guys today one is the $600 that I made on Tesla today so I recorded the open you'll get to see the two trades that I took one was just a twenty thirty dollar winner and the other was Tesla which is about a six hundred dollar winner so I recorded the open live and I'll kind of splice that up for you guys so you can see my actual trade on Tesla and then also I did a really nice lecture today on psychology and level two it's about an hour long I know it's a little bit long most of you guys don't want to sit around and watch that but I put that whole lecture in this video guys so after I'm finished talking here go over to the desk you'll see my live trading on Tesla that's about three to five minutes and then an hour long lecture on psychology and level two you guys you don't want to miss this a really good lecture a lot of people don't talk about level two and level two is really important how you get filled on trades liquidity spread bid-ask how much room to give a stock what types of orders to use limit markets top limit etc and so forth alright so again stick around for that so you'll get to see the live trading on Tesla how I made six hundred bucks on that in about five ten minutes and then also an hour-long presentation on psychology guys fear greed that need to be right it's very very good very informative and then obviously level two as well so enjoy the presentation and I'll catch up with you guys again soon [Music] you [Applause] [Music] as I'm going to add a little Tesla at 3:01 okay and then I'm gonna add a little more 302 if it gets there it may not it's pulling back right now guys on this but I'll put that out there like that and just to see what happens Tesla guys I told you I was gonna add some right at 301 okay so I've added some Tesla and I'm gonna look to add more 302 all right so I'm gonna get full on Tesla guys at 302 just FYI at 302 I'm getting full on Tesla guys I'm gonna be full on Tesla here at 302 right there okay I have a $2.00 stop now on Tesla which means basically lower the day okay target on this is is far far away all right there we go all right guys so Tesla target we need a lot okay we need like three oh five Tesla's stop break-even guys Wow is it gonna really tag us at break-even that quick Tesla stopped break-even guys for well for me that's 301 35 but you know follow your rules it was up 405 bucks hopefully we can get another run up top here all right down to my last hundred shares of Tesla guys okay so that locks in a half of an R and for me full target it's gonna be 3:05 come on baby here we go come on there we go locked in a little more and all right guys I'm gonna I'm gonna walk on Tesla here next next bounce all right there we go all right I'm done here guys Tesla can come back up that's actually full target I just I honestly only got one are out of this thing actually I got a little more than that there we go all right out Tesla guys out Tesla for 1.25 R there's only risking about 400 bucks on this so I don't know what that comes out to 1.3 R 0.35 R so all right I don't I mean you guys had plenty of time to get it I should have readjusted the order better for you guys does that make sense meaning when I said 302 bye - 9990 I should have readjusted the order better see it meaning the two minutes I'm gonna take a look at juniper in a second see it right there we should and I nibble some there right I told you guys hey I'm gonna nibble some here and I did I got 301 some I got 302 some and you could have added at 303 but anyway if I had held perfectly I would have actually got about eight eight or not eight hundred bucks out of it something like that okay guys so today's topic is psychology and level two some of you might think that's a strange combination psychology and level two maybe perhaps right psychology obviously is the foundation for everything you do as a trader it really ultimately determines your success and failure as a trader and I understand to many folks it's a it's a relatively boring topic right when you think about it you're like psychology everybody always wants to look at chart slides chart slides chart slides right that's what everybody wants to look at all the time and I get that right charts are kind of sexy they're interesting they're fun whereas psychology is like somebody talking to death but yet making good points level two is a topic that gets very little exposure in this business and I find it very fascinating that it gets such little exposure and the reason because are the reason being is because if you don't understand at least level two on a basic level you're not gonna make any money in this business and you ask yourself well what why because you're not going to get filled I mean even even folks that understand level two and we talk in professional trading strategies there's a whole chapter on level two and yet there's still many of you out there that are they're still getting skipped on trades you know today for example when we were looking at the shoot can't remember the symbol that a and T X or whatever the heck it was really spread e stock I mean it took 30 sets to get filled on that and that was with anticipating it all right so there's a lot of you getting skipped on trades and you're more likely to get skipped on the really good ones because they build up so much momentum with the institutional money behind them so I find that these two topics psychology and level two are very important one because it just it is the core belief in principle of how your trading actually goes is psychology and level 2 is the physical act of getting filled on a position guys a position is only as good as how many shares you can get filled on you can't get filled on it it's not a good trade tell me I'm wrong if you can't get filled for the amount of shares you would like to get you're trying to get a thousand shares you get a hundred well that trades garbage now you got ten times less shares and you want it's garbage so level two you could argue is up there amongst the most popular important topics that we go through and trade ok what you guys have to understand in trading I'm not gonna read this slide verbatim okay is that it's very core trading is simply a game of statistical probability if you don't understand that sentence you cannot be a great trigger okay I don't want to hear it from all the people out there that say oh I have a nine 2% batting average or 95 okay just move along okay trading is just a game where great patterns fail poor patterns work great patterns work bad patterns fail the patterns that we look at okay and I don't care what anybody in this industry says I don't I really don't I've been doing this too long what I'm going what I mean by that guys is this the edge we have is very small I know people want to tell you that the edge they have is huge and use my trading method because my edge is the best okay between all the different styles of trading there are definite differences out there but the differences aren't quite as big as you think all right most people nowadays are trading the market open if you're an intraday trader you're trading the market open it's the most popular time of the day to trade it always has been but lately the last five years three years it's gotten really popular people are looking at gap errs earnings those types of things and they're using those gaps to gain an edge and once they get the gap they're looking for a pattern a three-bar play a buy set up a climactic a breakout whatever guys there's not that much of an edge in those patterns and if you think I'm wrong go take a look at your batting average at 52 percent 59 percent 47 percent how much of an edge do you really have if you're batting around 50 percent right so the edge we have is a valuable edge but it's a small edge so the key to making money is being consistent doing the same thing over and over again if you if you mess with that you're in big trouble because the edge isn't big enough that you're able to mess with that and get away with it most of the time all right so at it's very core trading is simply a game of statistical probability that is it every trade entry stop target entry stop target okay so it's a very simple comp comment but it's a very important one all right that's the edge statistical probability combined with consistency right so it's a game of statistical probability it's nothing more it's nothing less the sooner you believe it sooner you make money guys it's not always the perfect chart pattern that works it's just consistency all right it's just consistency and that's across the board with chart pattern with money management with trade management if your plan says after three consecutive losers you quit then you quit if your plan says your target is two to one you're risking $100 your target is 200 you're risking a thousand your targets two that you quit when you get 2,000 that's what your plan says don't go against your plan it's just all about being consistent so this really comes down to what we always say around here at live traders is trading is simple but it's not easy right it's simple to look at a breakout or a bi setup it's simple to know that your target is two to one but it's not easy to get the two to one for example today on Tesla I got out of that too soon should have made eight or 900 hours I made 550 or 600 or whatever it was okay simple but it wasn't easy got a little jittery on it okay at the end of the day or the beginning of the day whatever you want to call it guys this is the stuff that bores the hell out of people people hate slides like this or roadmap to success but yet this is the entire business right the first bullet point they're trading as a business treat it like one 98% of traders fail this you don't even need to go down the rest of the list you you've failed and lost money because the number one bullet point at the top I'm sorry guys you know me I like to call things pretty direct and sometimes I ruffle some feathers most people are just pikers they're just hackers man most people that come into this business it's just a passing phase in their life they're not really taking this seriously they're not really seeing themselves as a genuinely professional trader for the next 20 years it's just oh man so-and-so told me that they make like $1,000 a day you know a couple hundred grand a year doing that and like they do it in their pajamas from their office and and like they can do it from anywhere in the world and it sounds pretty neat can you teach me and I get emails and DMS on into your all the time from comments just like that it's depressing they turned me off this is a business whether you're starting a coffee shop a restaurant a car repair shop whether you're starting Apple Computer or Microsoft in your garage this is a business make no mistake about it it's one of the most challenging businesses you will ever try in your entire life I promise you and the most of you have tried it know what I'm talking about so when I say treat it like a business ask yourself would you fire yourself if some if you were working for you okay would you fire yourself if you saw what you were doing as a trader the answer for most of you should be yes are you tracking your trades every day many of you aren't do you have a trading plan many of you don't have one and the ones that do have it don't follow it okay are you following the rules in your plan with money management trade management no all right are you are you getting a proper education I don't just mean buying stuff I mean market education to experience education right the stuff that you can't buy the experience part of it are you talking to other traders are you reading as much information as you can get your hands on no the answer is no and if you do you do it for three to six months and you think oh well magically I should be a great trader now why aren't I successful yet rome wasn't built in a day and most people don't get rich overnight in any business period okay so I'm gonna go down this list quickly the first one is the most important one though one guys choose a defined method immerse yourself in it really I don't care what the method is doesn't have to be live trades I really don't care all right choose a time frame you'd like to trade it alright I see a lot of traders mixing timeframes and trying to do this and try look if you're gonna be a market open trader pick the 1 2 & 5 minute chart get really really really good at it and make money from it don't be a jack of all trades and a master of nothing it's more important to be a master of one thing once you master that one thing then you can branch out to other things and potentially make more money in other avenues but master one thing first set the parameters for the stocks you're gonna trade guys are you gonna trade New York stock to Nasdaq what about MX stocks are you gonna trade ETFs maybe I don't know are you gonna trade 0 2 berkshire hathaway are you gonna trade five $200 stocks again I don't care I'm just saying put parameters out there are you gonna trade stocks with at least a million shares a day or you don't mind trading stocks with two or three hundred thousand shares what about spread eNOS whipping us all of those things you have to determine I'm not gonna go into them here because they're all laid out in professional trading strategies time your trades with the market internals try not to go like right now the spy is ripping you probably don't want to short anything right now it's probably not a good idea okay that doesn't mean don't look for relative weakness you're just not gonna take it right now okay trading money management guidelines this is your entire trading world all right I say this all the time you guys get tired of me saying it but I'm gonna say it again blowing up a trading account is not a badge of honor it's just stupid trading blowing up a trading account is not a badge of honor it's just stupid you should never blow up a trading it should never happen to you ever not ever why because your money management shouldn't allow it if it happens that means you risk too much money for your experience level right your risk got ahead of your experience if you're new and you're not making money ten bucks a trade that's it you lose you lose 10 bucks guys it takes a lot of $10 trades to blow up a trading account doesn't it it takes a hell of a lot of $10 trades to boil poor trading account therefore you shouldn't be blowing up trading accounts by the time you get to $200 risk $500 thousand dollars you should be comfortable enough confident enough consistent enough and disciplined enough to not blow up an account right so discipline a patience to follow your plan in your method that is it okay no such thing the Holy Grail what is the Holy Grail as it says guys in trading terms the Holy Grail is to search for the perfect system with the perfect set of parameters indicators and settings that makes money in any market and is easy to follow it does not exist the market is always changing okay one month your plan makes $30,000 in the next month your plan makes $3,000 and then some months your plan loses three or four thousand died just the way it is okay now I'm not saying too not refine or you know clearly define your training you definitely should be refining your trading absolutely of course right the Holy Grail is becoming consistent coming in every day looking for the same types of patterns with the same types of entries right and using what you know to work successful right but there's no such thing as something that works every day all the time no trader wins all the time okay I usually have two down months a year I shouldn't say down months usually one down month and one breakeven month a year every year every year it happens I can't explain it it just happens I can't predict what month it's gonna be because I used to think I knew and then over the last five six years it's been a random month every year one month it's August one month one month is February or one year sorry it's August one four year it's February and you sit there and go it makes no no rhyme or reason I know it's just the way it is okay it's just the way it is consistency is what makes money so I want you guys to take a look alright at this I'm gonna go through this quickly because I want to spend some time on level two and I don't want this to be a three-hour lecture all right when we take a look at this chart I think we can generally agree regardless of your experience level as a trader or the methodology that you use as a trader that this is a pretty nice consolidation breakdown right and if we take a look at this you have a very narrow tight base or range back to the declining moving average with a relative volume drop in the middle of the base and this is what I call a ruler breakdown what I mean by that is you can literally lay a ruler across it it's that tight right it's just sitting there like I don't know sixty seven eighty sixty seven eighty six it's beautiful it's gorgeous right entry here stop here boom you're paid and you're paid handsomely and quickly right the first twenty minutes of this trade you're making good money and then if you held it all day most traders can agree that that's a great pattern I would think right if I were to ask a roomful of people is that a nice breakdown most people would say yes by most I mean 80 plus percent okay so we look right here RL nice tight consolidation back to the rising moving average relative volume drop volume spike on the break above 142 so you get in at 142 this little arrow should be a little further over but you get the point right stop-loss is like 141 60 40 cents guys five minutes it's up over a dollar so if you had a forty cent risk on this and you're up a dollar ten it's almost three to one on your money in five minutes this is breaking above the prior pivot high you're above all three moving averages I don't really use moving averages guys I put them on my charts for you guys I honestly for those of you that are in the chatroom here as you can see I don't really have moving averages on any of my chart point most people would say hey that's a pretty nice breakout if you're a breakout trader okay not to be outdone the pullback traders so you have a stock that's up 1 2 3 4 5 6 7 8 9 10 bars pulls back we're level to support or miners support depending on which one you want to call it right at the rising moving average with a bottoming tail and a doji bar on a 50% retracement the highest 72 40 the low is like 70 170 the middle is about 70 to about 40 50 percent right it's perfect where do you buy it right over here again the arrows should be a little bit over here right there right there it's where you buy it you buy it right there I don't know what's that like 72 10 give or take stop 72 10 cents stop yeah I know it's a $72 stock but point is moves up almost 50 cents five to one on your money in 30 minutes most people will look at that pattern and go that's a really nice breakout in an uptrending stock at the rising moving average at supports got a lot of location it's beautiful okay here's another breakout right sits there chop-chop-chop-chop boom right relative volume drop volume spike $64 your stop losses 10 cents guys it goes up five to one on your money fifty sixty cents okay then we can go here now your oh wait wait what's this doing in here it's not that great it's okay right I mean you have a little double triple bottom support at 3940 it's okay but it's not great most people that would look at this would go yeah this is mediocre it's not as nice as the last three or four charts you've shown guess what I agree the last three or four were much cleaner tidier prettier patterns so what's the overall point here guys and I'm making I'll take a look at a couple more and then we're gonna move on okay couple more here we have a stock that tanked from 71 dollars down to almost 60 okay that's on a 5-minute chart that's a really nasty sell-off look how many wide range red bars you have okay look at the volume spike guys look at the consolidation over here where this stops doing like 50,000 shares per bar over here it's doing a million shares per bar it's doing 20 to one on the volume here you got a bottoming tail a green bar and you get a climactic buy setup parabolic buy setup target first targets moving average second targets back at 70 pretty nice pattern okay now why am i showing you all this and we'll do one more little sell setup right stock gaps down there's support here at 980 there's support here at 960 gaps down and moves below right moves below support bounces back right below the declining moving average you get a change of color bar went from green to red you get a topping tail right there from the top of the pivot here to the bottom that's about a 40 percent retracement drop so we just looked at I don't know how many charts seven or eight charts okay and outside of perhaps one they all look pretty good and most people looking at them can identify that one chart that didn't look so good and the rest of me you guys are going googly-eyed over wow what a great breakout wow what a great pullback by said of wow what a great climactic and there's a lot of other patterns out there so the next slide is say prophetic but what you believe is dramatic effect on your outlook and trading it in life but I want to take it one step further than belief systems okay you just looked at eight or nine slides of charts and most people can sit there and go yeah that one's not as good as the rest like what's the outlier here all right what's the pink elephant in the room it was that ugly chart everything else looked really clean so my question is simple rhetorical but simple what's the problem if you have no problem recognizing perfect patterns and you had no problem recognizing a relatively sloppy pattern why aren't you on millionaires oh it's an honest question it's rhetorical but honest what's the problem it's between your ears so there's two issues here one some people don't think those charts are that nice they have a different belief system of what a nice chart looks like that's one but that's a minority right that group of people is a small group of people most people that look at those slides but wow those are nice so let's talk about the majority the 80 or 90 percent are if you all can recognize those patterns are really pretty what's the problem exactly discipline you don't have the discipline to wait for your pitch why are great hitters in baseball great they foul off the bad pitches or let me let me check that they let the bad pitches go right and the ones that they're like really close to maybe being perfect but not quite they file them all and then the good ones the crush most traders don't have the patience to wait for their pitch they simply don't have the patience to wait for the perfect pattern and a lot of you out there and I'm talking to everybody okay you want to go into a trading room for action I want the action excuse my language guys cuz I curse a lot action you should be here for money shouldn't be here for action should be here for money okay but a lot of people want the action have you guys noticed and I have seen this throughout my entire trading career a lot of poker players become traders a lot I mean a lot of poker players or traders they want the action not in it for the action made it for the money okay so stop looking for action and start thinking about money start imagining stacks and I'm not joking imagining stacks of hundred-dollar bills on your desk and imagine every time you mess up somebody takes a couple off your desk a couple off your desk you do something right they put a few extra on your desk okay have two stats one maid and one that you're about to lose write and see which pile goes to you know goes to zero first so what you believe has a dramatic effect on your outlook and trading but what exactly does that mean sure what I mean guys is you know that's saying out there Jeff eh is used a lot is to know and not do is to not know it's basically saying talk is cheap you could sit here and say this stock looks higher or lower but if you don't actually put your money where your mouth is you don't really believe it we all do it it's just to what level do we do it right so your belief system is dramatic in this business we get complacent sometimes soon as you see a stop go green imagine you start getting clammy hands who would might pull back as soon as it goes red you do the exact opposite what is the exact opposite it'll come back I'm gonna give it more room it's counterproductive it goes breathing you go I better get out before it goes red it goes red and you say I'll give it more room so it can go green so wait let me let me check myself here this stock that looks like and is going lower and is red red red you want to hold that and the stock that's going green and it looks great you want to get out of that now you wonder why 95 plus percent of people lose money in this business that is it I just summed up psychology in three sentences because the crap that looks like crap you want to hold and the stuff that looks great you want to get out of Wow good luck making money and trading right good luck making money in this business you won't I understand it's not always easy I get that but do you see that the conundrum here I'll give it more room it'll come back what does it come really really come down to it's not fear it's not greed it's the need to be right see if you get out of a stock that's green you're right it was green you could tell the world I made money on that I was right but if you get out of a stock that's red you have to admit to the world you were wrong right you have to admit to the world you were wrong newsflash most people have big egos and they lack objectivity right most people have a really big ego and they have terrible objectivity they justify right you call it you can you know catch a kid's hand in a cookie jar and you're gonna get some excuse instead of just saying I'm sorry I was wrong you're gonna get an excuse it happens all the time in this world all the time okay people make excuses for things that are inexcusable they kind of come off with a reason for it nobody cares in trading nobody cares so you need to get away from this attitude of I need to be right you know in sales they always say you can be right or you can be rich trading is no different the need to be right we'll we'll drive you bankrupt the need to be right will drive you bankrupt it's it'll blow up your account so what you need in this business guys it's something called mindfulness mindfulness is the capacity to be aware of your thoughts beliefs and biases in real time okay think about that you need to be present self aware and present in real time why why because we all experience these emotions we're human beings we're not robots although some people seem like robots we are not so you need to be aware when you get into a trade and it goes again you need to be aware go wait okay step back Jerrod Musa you have an entry stop and a target for a reason this pullback is okay and even if it's not okay I have a stop-loss in place for that meaning I have a solution and the solution is not to worry it's not to get out it's to trust the plan the mindfulness is saying to yourself let it go we prepared for this before we took the trade we knew that this was a possibility when we took this trade there was the possibility it wasn't going to work if you are not prepared for that possibility newsflash you shouldn't be in the trade period end of discussion there's really not nothing else to say about that preparation for the worst is just as important as preparation for the best nobody wants to stop out and I'm not saying you're going to be happy about it but you need to accept it we're all guilty of this from time to time the only difference between the money makers and the money losers is the money makers do it very rarely or if they do it that's on a small scale targets $1,000 sell at 900 very small scale targets $1,000 sell at 200 that's a problem okay so mindfulness the capacity to be aware of your thoughts beliefs and biases in real time okay your thoughts and state of mind follow your emotion right emotion doesn't follow thought emotion is just a reactionary thing right my stock goes against you immediately get upset darn it man that's what you think then your thoughts state of minds and actions follow the emotion the emotion is the trigger and then the action hopefully is to hold not get out of it even if it does stop you out and then the worst part the worst part is when it goes against you and you say I should get out and then it stops you out for a loss of money and then you say to yourself I knew I should have gotten out so what do you do the next time the next time it goes against you you get out and that's the time it pivots goes higher and hits your target and now what are you doing you're chasing your tail and that is when people lose money right so emotions are triggered when there's a disruption of a familiar or established pattern guys think about this emotions are triggered when there is a disruption of a familiar or established pattern she'll read that over and over and over and over and over again why because everything you do in trading has happened to you before you've hit targets before you've stopped out before you've had slippage on entry before you've had slippage on stop outs before so emotions are triggered when there's a disruption of a familiar or established pattern so Water traders so emotional we've all stopped out on a trade before we've all lost money before that's familiar to us we've all hit targets that's familiar to us but yet most traders tend to be relatively emotional I get emotional at times I get jittery I sell a little bit too soon so realistically we shouldn't be very emotional you come in and go the most I can lose today is three to one because if I hit it I stop my targets are two to one whatever it is for your plan and that's it what we know what's gonna happen so that should help keep the emotions in check I'm not saying it always does but it should help keep your emotions in check knowing what your target your entry in your stop is ok-ran how we create our understanding of our world from our adaptations to our deepest fears and desires the problem we have in trading it's not trading at all trading is simply the mechanism that makes you feel a certain way so what I mean by that guys is there's two problems here the need to be right is an ego problem right losing on a trade is an ego problem it's not even the money most of the time guys I have seen traders and I've probably been there myself - I have seen traders do the same thing on $10 risk as they do on $500 or $1,000 risk think about what I just said clearly it's not the money I mean if you lose $10 I mean you're gonna you're gonna go live in a tent down by the river I doubt it so what's the problem it's the need to be right it has nothing to do with the money that's one half of the people and the other half of the traders are trying to pay their bills with no experience you want too much too soon your expectations exceed your experience let me repeat so you get it your expectations exceed your experience and that creates emotion and that emotion creates problems for your trading where you do things you shouldn't be doing so half of the people it's the need to be right I just need to be right it's not even the money you've seen people do that with such small risk it can't be the money five dollars ten dollars who cares if you lose five bucks right guys I mean I've done that before right your your plan says to get out of a trade but it's like ten dollars under breakeven and you know what I'm not gonna take the ten out I'm gonna wait for it to pop above breakeven I'm gonna sell it for a twopenny game and then what happens it completely stops you out for minus a thousand or minus five hundred and you sit back and go what was that ten dollars really worth it no but it was the ego of closing out the trade in green versus losing $10 on I know I've done it people out there if they're honest with themselves they've you've probably done it too crazy crazy you're risking 500 bucks on something you're gonna lose ten bucks and you don't know I know I need to make five dollars on this just so it's green it's nuts okay so we must develop mindfulness as a tool to examine our thoughts in the middle of a trade before we take a trade in after we've exited trade okay otherwise we lose objective perspective and begin the fear-based process all over again okay which ensures the same thing will happen the next time we're confronted with a similar situation what does that really mean in layman's terms it simply means traders typically repeat the processes employed and bad good and bad you repeat good things you repeat bad things but for most traders it's bad things because most of the things they do are negative based okay this is a very emotional psychological business guys okay and unless you can control that little thing between your two ears that we're supposed to have a brain unless you have mindfulness objectivity you'll never be a great trader okay all right so guys I am there's more slides in here that I'd like to discuss but I'm just not going to to go over them right now okay I'm gonna go over one more thing and then we're gonna get into level two goals this is a huge issue I'm gonna skip right to the middle remember outcome goals without process goals are just pipe dreams I would say entering the trading business this might be the number one problem that every trader has I had it you've probably had it I knew what I wanted as an outcome just didn't know what the process was gonna be think about it think about the movie the pursuit of happiness for those of you have seen it he's broke he's poor he's destitute he's outside the Dean Witter building a guy drives up and I think it was a 348 Ferrari cool car and he goes up to him he goes man what do you do right I don't know his exact sentence to use but what do you do what was he looking at who's looking at the outcome this guy drives a Ferrari so he must be successful it's not always true but as a general ISM it probably is generally true so he's looking at the outcome he asked them the question to possibly learn the process so everybody wants to get into trading because they see outcome what's the outcome I'm not gonna work 80 hours a week I'm gonna be able to make a lot of money for my house that's what they see is the outcome gonna go make six figures and I'm gonna do it from my pajamas or anywhere I want in the world they have no idea none what the process is to achieve the outcome well if you don't know the process you're never gonna reach the outcome right it's like I need to go to I don't know I need to find my way to Disneyland I don't have a map and I'm not gonna ask anybody good luck finding Disneyland right so in that goes raining it's it's you see the pot of gold but you don't know the road map to get to it the pot of gold is the outcome guys without the process you're never gonna get there and this process comes back to treating this like a business everybody wants to make excuses okay and guys I'm at the point in life where I just don't care it I have gotten to that stage like I used to tried like I used to be the type of person that wanted to save every last person I don't care anymore why because people are going to do what they're going to do anyway what am I saying here what I'm saying is many of you will listen to what I'm saying you'll listen to this and you'll watch the recording over and over and it'll mean something to you and then the other 90% will go here that makes a lot of sense and as soon as they walk out of the room it's blown it's like people going to a Tony Robbins seminar there are excited when they're in front of Tony two weeks later they get home three weeks later and they're back in the same damn rut it's like that New Year's resolution to go to the gym I think they have an actual number on I think they say seven weeks six weeks six weeks after the New Year's resolution 95% of people are back to doing what they used to do some of you are gonna listen to this and it's actually gonna mean something the rest of you are just gonna be oh yeah that makes a lot of sense and I'm gonna try and then trying isn't you need to do you know I'll tell you to take this course or I'll tell you to get a trading buddy or read this book you won't do it oh it's too expensive oh and I guys I'm not talking about live traders here like live traders talk about everybody somebody will tell you to do something and you'll make an excuse why you can't I don't have the time I don't have the money I don't have this that's life that's not trading that's life in every business so stop complaining about the one percent being the 1% because there were the people that didn't about it they went out and did it don't get me wrong I'm not an idiot there are some people that went out and tried their ass off and it didn't work I'll give you that but the vast majority of the people that didn't work their ass off and complained about the people that did okay so have a process goal for your outcome not just in trading but in life you have to have a roadmap how you're gonna get there don't just say I won a Lamborghini you got all these damn high school and college kids and kids in their 20s going I want that I want that I want that well how you gonna go get it figure out the process and the outcome will take care of itself and by the way one last comment on this before I get into level 2 doing anything just for the sole sake of money is a pretty shitty thing do it for the freedom do it for the flexibility do it for your family do it for your kids but just to come in and say I just want to make money most of those types of people don't get very far in life there's got to be a passion a desire behind it I really mean that that's not hoopla hogwash corny stuff I mean that you can't wake up every day go I hate my job I'm hoping and I want to be rich at the same time they're conflicting ideas and they're hard to reconcile ok all right woo all right level 2 considerations I spent about 10 minutes longer on psychology that I wanted to but nonetheless and by the way guys that psychology that I just went through that I just spent 30 40 minutes on that was like four pages out of about I think the psychology chapter now the trade management level two chapters as long as the psychology chapter is one of the longest chapters in the book it's like 60 pages and I just went for them we spent a long time in psychology in professional trading strategies because it's everything without it you can't make money so let's talk about level 2 guys alright level 2 is a topic that I don't want to say it's taboo everybody knows level 2 meaning what it is right everybody has an order entry box everybody everybody but nobody is using it properly I guess is a good way to put it so how can we get better fills in our trades how can we actually get filled on trades level 2 is all of these things alright so these are some considerations when trying to get filled on your trades what is the overall volume of the stock what's the price of the stock guys Amazon is gonna have a bigger spread than Bank of America one stock is whatever Amazon is sixteen hundred bucks and one stocks like thirty this spread and the WIPP of the stock okay it's a lot harder to get filled on a stock that has a 50 cent spread then this is a stock that has a two cent spread okay the size of your stop-loss and your risk to reward yes level two has a lot to do with this and I'm gonna discuss it in a minute okay how many shares you need to get filled how badly you want to get filled this has everything to do with how much room you're gonna give your limit order and I see most people not giving their orders enough room I mean I see people out there they have a one dollar stop-loss a 15 cent spread and they're giving the stock three pennies to get filled you're not going to and if you do you just got lucky okay so these six bullet points are very very important in terms of getting filled and I'm not going to go over see in the in the pts course each one of these is two or three pages long so just these six bullet points represent like 15 to 20 pages okay I don't have that time today so what I want you guys and what I want to really focus on today is what I call the balance of power it's the bid versus the ask okay so if you have a large esque and a small bid it's not ready to pop what this means is for those of you in land I'm going to show you some level two pictures here shortly okay the bid are the buyers and the ask for the sellers okay now on the short side it's the opposite right but the bid are the people bidding for the stock saying hey I'm willing to pay this much and the ask are the people selling go but I want this much so you come into a stock and you say well I want to pay $51 right that's what I'm willing to buy it for I'm bidding for 251 and you're selling the product and you're saying you know I want 50 102 so I don't want to pay 50 102 all right let's meet in the middle of 50 101 so that's that tug-of-war that auction so to speak that's going on the bid in the ask okay the size of the spread guys the size of the spread simply means the amount of pennies between the bid and the ends I know that that's very elementary I get it most people don't even recognize this if they recognized it they wouldn't be getting skipped right so the size of the spread is simply for example the buyers are at 51 this sellers are at 50 102 it has a two cent spread that's a tight spread generally speaking unless it's like a you know $5 stock or something like that okay you're going to have larger spreads on stocks like Google Apple PC Ellen Amazon Berkshire etc okay be thankful guys when I first started in this business they didn't do pennies they did fractions right quarters half's three eighths teenies right 1/8 1/16 teenies at one point the tightest spread you could get was 25 cents okay and then it was down to 8 cents the tightest spread you could get on any stock was 8 cents now they're their pennies we're lucky we live in a great world now trade fees were 50 bucks to trade 25 bucks a trade now they're $1 a trade 3 dollars a trade $2 a trade sheep we're lucky so the total shares you see at 51 and your so for example if you need a lot of shares and you don't see a lot of shares at 51 guess what you need to start your order sooner I'm don't worry I'm gonna give you an example so for example if you're trying to get fifty one dollars that's the price you want to pay and you need five thousand shares but you see ten thousand at 51 some people might mistake this and go oh well I need five and they're showing ten I'm gonna get filled you're not the only person in the world that's trying to get that stock okay so let's take a look alright this is a ladder type of level - alright guys this is a ladder system level - alright I'm not putting in the older-style in here right now why cuz I use the ladder myself personally alright why cuz it's awesome so right here you have the buyers showing five thousand seven hundred and thirty three shares you have the sellers showing fifty three thousand seven hundred and twenty nine shares but in middle little eleven cents spread or nine cent spread okay depends on how you want to look at the spread okay so you're sitting here going hmm how am I gonna get filled on this well when the bid starts creeping up then you know the buyers are starting to do what they're starting they're willing to pay more for it right now you have kind of a I hate Jesus analogy you have a government shutdown you have Trump and Pelosi and neither one of them wants to inch any closer all right well over here is what Trump did it last week he gave in a little extended the government so what did he do he said I'm willing to pay up Pelosi said I'm not I'll get off the politics point but you get my point the point here is notice the sellers didn't move the sellers are still sitting at 56 they're still sitting at 56 over here but what has changed the buyer said I'm going to start to pay up gonna pay up I'm gonna pay up now you have a situation where this stock is ready to pop stock is not going to pop here you have to make a decision here okay my general decision here if the spread doesn't tighten usually the spread will tighten and when the spread tightens that's your signal it's getting ready to pop and as the spread tighten something else happens as the spread tightens the offer which is the bid here right at the ask sorry the bid I'm going to confusing you guys start the bid my apologies the bid right here increases notice it went from 5,700 to 16,000 the bid is increasing notice what's happening the offer here the ask is getting smaller so at 53,000 over here and it had already printed 23 now it's down to 27,000 and now it's up to 56,000 so you can see it printed about 33,000 more shares why buyers are starting to pay up they're starting to pet the off the ask is not changing here they haven't moved from $56 they haven't budged the buyers are starting to step up and pay 56 pay 56 pay 56 so this number is going to continually decrease but here's the rub if you put your order at oh one or Oh two or oh three you're not gonna get filled you're gonna get like a hundred shares why because all the damn shares are at 5600 so once you take out the sellers the buyers are going art that sellers are gone above it what's that going to do this stock it's gonna push the stock higher guys I need you to understand this is important the buyers are stepping up then went to 90 91 92 93 and they finally made it to 99 and oh oh which means what they really want this stuff they're willing to pay up 10 cents for it the vast majority of the sellers are at 5600 so there's two three happening here eager buyers and a block of sellers what happens when you take out all the sellers you have an eager group of buyers they want this stock bad and the sellers run out of shares to sell them stock pops because the other people are going holy they're so eager to buy this thing I'm not gonna sell it over 300 400 I'm gonna put my sell order way up here why because I can get more money for it that's the psychology behind it the buyers are proving they want the stock they came from 55 89 all the way up to 55 99 and this number of sellers is decreasing which means the buyers as you can see are increasing so the buyers are increasing the sellers are decreasing and when the big block of sellers is gone there aren't there's going to be some just not very many sellers up here what is the overall result the result is simple if you didn't take it at 59 or 50 if you didn't buy it at 59 or 56 if you didn't buy the 55 99 or 56 if you didn't buy it here you're not getting filled up here if you do you're getting a partial position liquidity vacuum exactly right and you wonder why you get skipped you're getting skipped because you're starting your order at 5601 and you're giving it to 50 603 it's just not enough to get filled it's just not enough to get filled got to give it more room and start your order sooner now it's urn what if it doesn't break what if and it happens it definitely happens just not often it's a 10% of the time what happens when this number keeps refreshing and refreshing and refreshing and refreshing and they run and their buyers get tired and they run out then this stock shake slower but that's about 10% of the time you have to be willing to let that happen okay yeah and sometimes the iceburg order gets eaten up and when it does the stock pops because sometimes there's also hidden buyers they don't see - but most of the time the iceberg orders get eaten up and they pop but every once in a while they don't but that's a risk you have to take so guys real quick this is an actual level - okay right here 56 right here 56 now watch watch what happens oh one no shares printed Oh - a hundred shares printed oh three four hundred shares printed for 3000 for nothing one went from printing ninety two thousand shares at 56:19 here looking feet weaned 98 99 and oh oh you got it like a hundred and I don't know one hundred and forty thousand shares give or take and then what do you get in the fifteen cents after it breaks twenty thousand maybe and no real shares to at least oh seven ten that area so you're either getting a partial fill you're getting a late fill or you're getting no fill I'll repeat that you're either going to get a partial fill say you need two thousand shares you get two hundred or you're getting a very very late fill which is a full fill like fifty six ten or you're getting nothing because maybe only gave you three cents and then nine times out of ten these are the ones that hit and run quickly why because of the commitment from the buyers the ones you get skipped on are almost always the ones that work painlessly that's why you got skipped so what do you do you get in before everybody else gets in if you're concerned what do you do take half-built before it breaks and a half after breaks worst case at least you have a half lock worst case at least you have a half of a lock okay so it's really really important that you understand that was my knee back um one sec guys I really actually did genuinely hurt so you have to understand where the buyers and sellers are okay if you don't you're not gonna get filled on half your trees okay previous day has nothing to do with current level - right previous day has nothing - there might be previous volume from yesterday you know maybe there's some hedge funds or looking to get rid of this stock at 50 so I don't know but it has nothing to do remember now we're not talking right now about charts we're not talking about a resistance area at 5605 we're simply talking about volume and level - if there's a huge resistance point of 56 10 you're probably not gonna take the trade anyway all right maybe you would I don't know okay does it matter what ecn routes that you use the answer is absolutely unequivocally yes yes yes guys there's like I don't know 30 40 different routes I don't have them on here on these slides but some routes have almost no liquidity whatsoever you want to be on edge X you want to be on ARCA you want to be on bats you want to be on the five largest ones guys now if you're trading on tradestation they have what they call intelligent route which uses those routes okay but if you're on a platform where you choose every route you won you're gonna pay more for ARCA but if you're a traitor let me put it this way if you're a new trader who trades like 50 share lots hundred share the route won't make a big difference if you're trading 500 share thousand share 5000 shares lots you need a good ECM guys okay are you gonna pay more for ARCA bats edge X yeah you're gonna point you're gonna pay like $3.00 per thousand shares all right now some platforms like trade session do not charge ECM fees most do NECN fees can be expensive right but I'd rather be filled on the trade and pay an extra five bucks then not get filled on the trade and give up a thousand its fact right it's a fact all right all right let me see you if volume shares if volume shows shares printed and on the ass we saw less share sitting at 56 ask area than volume so your are you saying that you're seeing a higher amount of bids than offer so let's say you're seeing 10,000 bids and 2000s that's just an indication that it's likely to move higher the balance of power has shifted and it's likely to move higher okay so we're gonna go through a couple examples here 1100 shares here 17,000 at 51 the stocks not ready yet right you still have some sellers at 99 you have most of your block at 51 now take a look at the same stock 10 minutes later now what the buyers are willing to pay up they were not willing to pay up over here on the left now they're willing to pay up and not only are they willing to pay up they're willing to pay up and there's more of them who over over here got together with their buddies and said you know what I need your help and they said all right I want in too looks like a good deal let's get in on this party and right now when these 15 that win this what I call balance of power starts to shift when this 6,000 goes to 10,000 12,000 and this 15 goes down to to 12,000 10,000 that's when you're gonna break when the balance of power shifts okay guys in professional trading strategy I do like five or six pages just on the balance power shifting okay so take a look at some of these examples okay just I want you to take a look fifty nine thousand two hundred and eighty one thousand it's not ready yet yes it's tight it's tight but when this 281,000 starts to get eaten into and here's the rub guys here's the rub sometimes this happens in like two seconds literally those two hundred eighty one thousand judges are gone most of the time it doesn't happen that way most of the time it doesn't happen that way you can see the 280 go down to 250 down to 220 down to 200 and when you start seeing it get down to like 40 or 650 60,000 you want to definitely make sure your order is in or you've already taken it I don't like to time the level two anymore I used to do that years ago but sometimes if you're even one second off you get filled way up here okay all right let's see example if the ask never shows more than 50,000 100,000 volume print at that price oh they're just hidden shares you can call I hate when people use the word dark pools but they actually are real there's plenty there's plenty of dark pools and unlisted things guys I ninety-nine point nine percent of average traders including myself don't have access to dark pools so if you see some trading educator telling you how they're getting filled on dark pools they're lying out their ass they are dark pools essentially guys are big institution too big institution okay Goldman Tamara Merrill of JP Morgan okay so when you do that you have to realize when somebody says that to you and they're not an institutional trader they're lying to you alright some of these guys I see online on YouTube the videos are gonna all I thought was a dark pool you're not in on a dark pool okay now there may be a dark pool in there okay and they truthfully in my opinion should be illegal because when you see what they actually do it's it's really it's almost like high frequency trading machines much of what they do should be illegal but it's the world we live in okay all right so when you see this guy's 19,000 versus 80,000 what you're basically looking for is the 19,000 to go up to say 30,000 40,000 and the 80,000 to dropped to fifty thousand 40,000 so what you want Ultima see how you know it's gonna pop is when the bid gets bigger than the offer right when the bid here is bigger than the ask over here then you know it's gonna break but when this has 19,000 and there's 800,000 right here it's not ready yet now remember that that I just spoke of could happen in 10 minutes slowly chip away it could happen in two seconds sometimes a massive block order comes in eats up the 800,000 shares and it rips you don't know how it's gonna happen okay you just don't know all right here notice it may not seem like a lot of volume but 19,000 for a price point on this stock is a lot where did it print one 7500 and then it printed almost nothing you're not getting filled for at least 20 cents on this most of you are getting skipped why you're putting your order at 170 501 you have to know you're not gonna get filled there when you see a spread this big and volume relatively thin you got to start your order at 98 99 Oh Oh on a stock like Bank of America you could probably put your order at Oh Oh Row 1 and you're going to get filled unless there's a million shares sitting there look at this stock 54,000 shares at 170 bucks and then almost nothing above it you're not getting filled okay here's more of them notice they're far more prevalent at whole and half numbers 108 thousand shares printed at $87 boom you just got skipped or you got filled at 87 20 here 10,000 shares almost 11,000 got filled at 120 boom you just got skipped or you got filled 20 cents late and look at the spread 15 cents bread look at this bad boy look at this bread the whippy spreading stock isn't it hello but most in the shares before it popped printing it 16 or 15 99 okay on the matrix with tradestation guys and here let me show you the difference here these are two different platforms tradestation is on the left I believe this is real tick on the right but I want you to see something these are two level twos and notice they're almost identical they should be take a look 234 thousand shares 237 thousands there's a few hidden shares 60,000 60,000 35,000 35,000 48 here 47 here but notice they're almost identical 57 236 57 136 but I'm just showing you the difference in the level twos they're both ladder level twos in the pts book guys I do have the regular old school level two and I go over level one on it level two on it all that stuff so this is just for our lecture today but in the course obviously this is way more in-depth I mean this is like a four hour discussion but the point I'm making is when you say how do you use the bid volume I see on the matrix very simple the same way I explained so now I look at this stock let's use this as an example 234,000 versus 57 I know this things about the about to go higher it's about to go up to fifteen thirty five okay why because there's five to one four to one buyers versus sellers here so I use it the exact same way alright so let me let me pull this off for a quick second alright hold on what do I have let's go to the level two here okay I like to focus on half and whole numbers guys obviously because that's a lot of my training I'm trying to look for something that's in that range all right because I want to I want to see if I can find something that shows a good level - yeah I don't have it today so you can see this right here this is about to put in a new high this is a hard level to to read right there's no whole number here you can see not a lot of volume up here but when you get to a whole number you're gonna see an unusual amount of volume all right and you're going to see buyers and sellers we saw it earlier today while was it BA when it went and broke 390 okay and if we go to 390 I bet you on VA there's an extra amount of volume at 390 there what's at 390 guys eighty-seven thousand shares look above it look below it a lot less shares whole in half numbers there something that we're humans there's psychological points okay so when you get into an area like 390 you want to start seeing the bid and the offer the bid in the ass tighten up and you want to see how many shares are sitting there before it breaks now if it breaks now it's not gonna mean anything why it already broke that area but I mean earlier today before it broke right when we're talking about right here at ten thirty five 1038 that area okay top is approaching a whole number let's take a look yeah okay so tough would be a good example now top is a bit exhausted and this is probably going to be a failed breakdown but what you're gonna see when you get there is probably a boatload of shares right we're not there yet but because it's so extended it's not gonna be nearly as meaningful but it's sat here for a very very very long time so my expectation here would be that tuck does put in a lot of volume what you're gonna see is instead of two hundred seven hundred shares and four hundred shares you're gonna see this go up to like two three four thousand shares and what's sitting at low is probably going to be like 50,000 shares forty thousand shares it'd be nice if it came down to that area we could be here for hours how do I know because this thing's been sitting in this area for about an hour alright but a different day guys a different time I'll record okay the level two right at the whole and half number in fact I recorded the open today so we could probably take a look at Tesla when it was at 303 right we waited for Tesla to break 303 we could probably look at Tesla at 303 okay you can see when it's ready and when it's not you know when it's ready when the bid and the offer tighten up and the shares start to get eaten into okay but top is a good example it's just not there yet all right so if it gets close if it gets close let me know alright but anyway guys those are the things you need to consider when looking at level two all right again I want to repeat this is not a super crazy in-depth look at level two we went through six slides okay in the book you're looking at 30 slides just on level to 40 slides just on level two so it's not overly complicated but it's very important we talked also about how much room to give your stop limit orders what type of orders to use limits for stop limits or stop markets we also talked about ecn routes which ones are more liquid less liquid to fees for ecn routes some ecn routes are really cheap some give bigger rebates than others so there's a lot to take in in trading and I thought that today's topic was particularly pertinent and relevant because well if you should get skipped on your favorite idea it's no longer a good idea think about what I said there if you get skipped on your favorite idea because you didn't give it enough room it's no longer a good trade because you didn't get any shares of it which means you weren't it wasn't possible to make money and we're here to make money so think about that all right so I hope you guys enjoyed that that lecture you know put these out every Wednesday guys so I hope I said a different topic each week but I hope you guys enjoyed that to get more great educational content subscribe to the live traders YouTube channel this way you'll get email alerts every time I upload a new video
