For stocks that show the best setups, do the following work before the market opens or while you watch the opening candle

• • Mark premarket highs and lows (this is where aftermarket and premarket trading shows where there is support or resistance)

    • • These highs and lows can be great triggers for establishing an entry point

      • In many cases, you may see opening candle trends get halted at premarket highs and lows before reversing

  • Identify whether there are other points of resistance (double tops/bottoms, trendlines, etc) or exhaustion (SSS50%)

  • Determine the strength of your stock by checking the trend direction on multiple time frames

    • • Daily, Weekly, Monthly - Swing Trading and Investing

      • 10MIN, 1HR, 4HR, Daily for Intraday and Swing Trading

The first hour and the closing hour (Power Hour) is the most volatile that can be unpredictable

• During this hour, big money is making their decisions

• This can move the price up and down in rapid movements for certain securities

• Whipsaw - when price moves quickly in the opposite direction; often retracing any gains or losses

  • This will occur most often in the open hour, final hour of the market, and when catalysts occur in the market

  • e.g. first 5 minutes of the market rises for $2, second 5 minutes falls $2 or more

  • You may even see a stock move up for several dollars, move down the same amount, and rise again

  • To avoid this, be sure to determine your direction with confirmed candles, volume, and stop losses/exits.

• Some people believe the first 30 minutes is more than enough to determine market direction. You will need to decide yourself after spending time in the market.

Opening Candle (5 minute, 10 minute, 15 minute, 30 minute, 1HR)

• • Depending on your trading style (timeframe) use the opening candle to determine the range

  • The opening candle will help us determine the typical direction for the immediate future or day

  • Exceptions include catalysts that directly or indirectly impact the business (See Catalysts).

  • After the opening candle is complete, we want to see which direction the next candle makes

    • • > opening range (High) = Bullish

      • < opening range (Low) = Bearish

      • Inside Candle = indecision in the market

  • Regardless of the initial candles, always be sure to check the overall trend (MA and Weekly/Daily Chart)

  • BEGINNERS or those new to the market should start with a higher timeframe before moving to a shorter timeframe; higher timeframes avoid a lot of the noise in price action and will often ride the overall trend

Continued Trend or Whipsaw?

• Once we have established our opening candle (30/1HR is best), we want to see the candle continually move in the same direction without retracing back the opening candle

• Two ways to play if an price action reverses back to the opening candle

  • • Close out your position at the close or high of the opening candle; we want decisive moves in our direction

    • Play the SSS50% Rule and find the midpoint to look for a bounce

    • Personally the first choice seems best to keep our losses minimal as the second strategy would imply that we are taking a considerable move against our position before exiting.

    • Remember. we want time frame continuity, but do not want to be bias.

• If the candle drops back within the opening candle you can expect the market or security to range (move back and forth within the opening candle to slightly above/below)

• You want to avoid ranging markets as they can be unpredictable in intraday trading. Using option strategies that takes advantage of ranging securities would be your best bet (Covered Calls, Straddles, Strangles, Condors)

• In general watch for the opening candle, you exit from your position should be 50% of the opening candle

Another way to keep trading simple is to use the concept of the opening candle on larger time frames instead of intraday. As an example:

• Weekly time frame - we use the daily candle to give us a direction for the week

• Monthly time frame - we use the daily or weekly candle to give us a direction for the month

• Quarterly time frame (3 months) - we use the monthly time frame

In any of the timeframes above, we would wait until the first candle forms and then create our bias. This works well with the SSS50% Rule, but could offer a way for you to keep things simple for long term trading.

• If day one of the month is positive, we would look for a close above the opening candle to enter our position.

• Our exit would be 50% of the opening candle or the bottom of the opening candle.

The disadvantage of this strategy is that you have wider risks that require greater returns. One way to adjust for higher risks is to move to a lower timeframe for exits and reentries. The next section addresses using full candles and moving to a lower timeframe.

We trade on FULL CANDLES and not partial ones (unless moving down to a lower time frame)

• In most cases, you want to use larger time frames to determine your entry, stops, risk, and reward

• Use a top down approach to determine the overall direction to allow you to move down to a lower timeframe to find your entry if the stock is moving in the same direction

• e.g. you are trading on the 1HR timeframe, but go down to the 10 minute candles to find your entry

• Wait until the final minutes of a candle or at the beginning of the next candle

Look for areas of Support or Resistance

• Look for areas where price reversed to take some profit or exit your position

• These can often point to exhaustion or hedge funds that are sitting and waiting for price to get to that level to reverse the market