Three kinds of gaps

• Common gaps inside a range: small, frequent, and filled quickly. These are the bread-and-butter gap-fill trades.
• Breakaway gaps that start a new trend out of a consolidation: these often do not fill for a long time, and fading them is expensive.
• Exhaustion gaps at the end of a trend: a last rush of buyers, frequently followed by an island reversal. These fill, and fast.

Why buyer exhaustion leaves open gaps

A gap up after a long rally is usually the last of the buyers arriving – the news is out, the crowd is in, and there is nobody left to push. When the gap stays open for several sessions with price unable to extend, it is a sign of exhaustion. The first strong down session then tends to fill the gap in one move, because there is no support inside an empty zone.

Trading the gap fill

We do not fade every gap at the open – that is how traders get run over on breakaway days. We wait for the first 15-30 minutes to show whether buyers are extending or failing. A failure to make a new high, followed by a break of the opening range low, is the entry; the stop goes above the opening range high; the target is the gap fill – yesterday’s close. The risk is small and defined, the target is known before the entry, and the setup repeats week after week.

The levels around a gap

Gap edges behave like support and resistance. Once a gap fills, the far edge often turns the market back the other way, which makes the fill itself a level to trade from.

The post Open Gaps in the S&P 500: Why Most Get Filled appeared first on Money Maker Edge Live Trading Room Stocks.

Recognizing consolidation

• Highs and lows that overlap for several sessions; no higher highs or lower lows.
• Daily ranges shrinking. On the S&P 500 emini, a week of 20-point days after a month of 40-point days is a coiled spring.
• Moving averages flattening and crossing back and forth – the classic whipsaw environment.

Two ways to trade it

Inside the range: buy the low of the range, sell the high, stop just outside the edge you are trading from. It works while the range holds, and the risk is small because the edges are close. Keep size modest – you are trading against the next breakout. The breakout: the higher-probability trade is the close outside the range on expanding volume, entered on the first pullback to the broken edge, with the stop back inside the range. The measured move is the height of the range.

Avoiding the fake-out

Ranges produce false breaks – a push through the edge that reverses and traps everyone who chased. Two defenses: wait for the close, not the wick, and wait for the retest. A breakout that holds its retest is real; one that trades back inside the range is a signal to take the other side.

Why consolidation is where the money is made

The biggest S&P 500 moves of any year start from the quietest weeks. A trader who respects the range – small, defined trades at the edges – is positioned, patient and funded when the breakout comes. The one who fights the chop with oversized trades is not. Read how we keep size and risk in line in what a winning day trading system needs, and why support and resistance define every range.

The post Market Consolidation: Trading the Range Before the Next Big Move appeared first on Money Maker Edge Live Trading Room Stocks.

1. Defined risk on every trade

Before the entry you know the stop, and you know what that stop costs in dollars. No exceptions. A trader who risks 1% per trade can be wrong ten times in a row and still be in business; a trader who ‘sees how it goes’ is one bad morning away from the end.

2. A reward-to-risk edge

Targets at least twice the risk. At 2:1, a 40% win rate is profitable; at 3:1, a 35% win rate is. This is why we trade from levels – support and resistance, Fibonacci retracements, channels – where the stop is close and the next level is far.

3. A written plan

What you trade, when you trade, what a setup looks like, what the stop is, what the target is, and when you stop for the day. Written, not remembered. The plan is what you follow when the emotion says otherwise – which is the only time it matters.

4. A daily goal and a stop-for-the-day rule

The best part of the S&P 500 session is the first hour. Most traders in our live trading room reach their daily goal in it and stop. Trading past the goal is where giveback lives; a daily loss limit is where survival lives.

5. A journal and a review

You cannot improve what you do not measure. The Money Maker Edge Trade Journal records every trade against the plan, so you rely on what you did rather than what you think you did. The weekly review is where the system gets better.

6. Accountability

Trading alone is where systems quietly die. A group that trades the same method – where the levels are called, the trades are reviewed, and the rules are shared – keeps the plan honest. That is the point of the room, and it is why the 3-day day trading course ends with a full day of live trading rather than a certificate. The system is the routine; the routine is the edge.

The post What a Winning Day Trading System Actually Needs appeared first on Money Maker Edge Live Trading Room Stocks.

Finding the levels that matter

• Swing highs and lows on the daily chart. The more times a level has turned price, the more traders are watching it.
• Prior closes and opens, especially yesterday’s high, low and close on the S&P 500 emini.
• Gap edges. Unfilled gaps are magnets and their edges act as support and resistance (see our note on open gaps).
• Round numbers on big indexes – they are where orders cluster.

The rule: old support becomes new resistance

When a support level breaks, the buyers who defended it are now losing money. On the first rally back to that level they sell to get out at break-even – which is why broken support turns into resistance, and broken resistance turns into support. This one rule explains most retests, and it gives us our favorite entry: the failed retest of a broken level, with the stop on the other side of it.

Trading a level, not a line

Support and resistance are zones, not exact prices. We never buy a level blind; we wait for the reaction – a bullish engulfing candle, a higher low on a lower timeframe, a failed breakdown. The reaction is the entry, the far side of the zone is the stop, and the next level is the target. Risk is defined before the click, every time.

When levels fail

A level that breaks on expanding volume and closes through is not a buying opportunity – it is information. The crowd that held it has lost, and the next level is now the target. Respecting a break is worth more than any individual trade.

Related: price channels and Fibonacci retracements, two ways to find the next level.

The post Support and Resistance: The Levels That Run the S&P 500 appeared first on Money Maker Edge Live Trading Room Stocks.

Anatomy of the pattern

• Peak 1: a rally into resistance, often on good news and high volume.
• The pullback: sets the neckline. The deeper the pullback, the bigger the eventual measured move.
• Peak 2: a second test of resistance, usually on lower volume. The failure here is the first real signal.
• The neckline break: confirmation. Every buyer from both peaks is now under water.

The mistake most traders make

Shorting the second peak because it ‘looks like’ a double top. Until the neckline breaks, the pattern is just a range, and ranges break upward as often as downward. We wait for the break, or for a clear rejection at peak 2 with the stop above the highs – never a guess in the middle.

How we trade it

The cleanest entry is a retest of the broken neckline from below: price breaks, bounces back to the line, fails, and we sell with the stop above the retest high. The target is the measured move – the height from the peaks to the neckline, projected down from the break. On the S&P 500 that often coincides with a prior support level, which is where we take profit.

Double tops and moving averages

When a double top completes near a falling 50-day moving average crossing below the 200-day (the so-called death cross), the pattern has the trend behind it and the moves tend to extend. When it forms in a strong uptrend far above the averages, expect the first break to be bought – trade it smaller or not at all.

See also: the island reversal and broadening top, two more reversal patterns built on trapped traders.

The post Double Top Pattern: How to Spot and Trade It appeared first on Money Maker Edge Live Trading Room Stocks.

What the candle is telling you

During the first candle, sellers were in control. During the second, buyers not only absorbed all of that selling but pushed price above where the sellers started. Everyone who sold during the red candle is now losing money. That shift from sellers to buyers inside two bars is the signal; the engulfing shape is just how it shows up on the chart.

Where it works – and where it does not

• At support after a decline: a bullish engulfing candle at a prior support level, a Fibonacci 61.8% retracement or the bottom of a price channel is a high-probability entry.
• In the middle of a range: meaningless. Engulfing candles print constantly inside consolidations.
• Against a strong downtrend with no level: usually just a pause before the next leg down.

The trade

Entry on the close of the engulfing candle or on a small pullback into its body. The stop goes below the low of the pattern – if price trades through it, the buyers failed and the idea is wrong. The first target is the nearest resistance; on the S&P 500 emini that is often enough for a 2:1 reward-to-risk, which means the trade is profitable over time even with a modest win rate.

Multiple signals, one decision

The best version of this pattern is when several things line up on the same bar: support, a retracement level, an engulfing candle, and rising volume. When that happens we do not hesitate – the risk is defined, the level is clear, and the crowd has just told us which way it is leaning.

Related: Fibonacci retracements and support and resistance.

The post Bullish Engulfing Candlestick: One Pattern, Multiple Signals appeared first on Money Maker Edge Live Trading Room Stocks.

What a bear market looks like on the chart

• A series of lower highs and lower lows – the textbook definition of a downtrend.
• Sharp rallies that fail at resistance. Bear market rallies are some of the fastest moves you will ever see, which is why they trap buyers.
• Volatility expands. Daily ranges in a bear market are often double what they were in the prior bull market.

Why long-term investors fear it and day traders do not

A buy-and-hold investor has one tool in a bear market: wait. A day trader with a method has the same tools as always – read the direction, define the risk, take the trade. The S&P 500 emini can be sold as easily as it can be bought, so a bear market is simply a market that trends down, with larger ranges and therefore larger daily opportunities. The catch is that the discipline has to be there. Bear markets punish oversized positions and revenge trades faster than any other environment.

Rules we follow in a bear market

• Trade the direction of the daily trend: sell rallies into resistance, do not buy dips because they look cheap.
• Reduce size. The ranges are bigger, so the same dollar risk needs fewer contracts.
• Respect the daily goal. Volatile markets tempt you to keep going after a good morning; that is where the giveback happens.
• Treat every rally as suspect until it makes a higher high on the daily chart.

Read more on why buy-and-hold is not a plan and on support and resistance, the levels that define a bear market rally.

The post What Is a Bear Market? (And How Day Traders Use It) appeared first on Money Maker Edge Live Trading Room Stocks.

SPY Daily Chart

The chart is showing a repetitive pattern, noted in the boxes, for the top and a pullback on the daily chart for $SPY.  Price has broken the bullish trendline and is showing the sellers in control here.  In June we had a golden cross where the 50MA  crosses the 200MA.  Looks like price wants to challenge the 200MA again and maybe a move to previous swing lows.

QQQ Hourly Chart

We see a lower high with a potential for forming a head and shoulders. We are in an uptrend but we are testing the bullish trend line. If we break the trend line, watch for it to go to support and if this doesn’t hold, we could get a move to the previous swing lows.

SPY Hourly Chart

We see a lower high and it looks like it may challenge the support. And if it is broken, look for it to close the gap on the lower support. Take note of the volume of sellers entering the marketplace.

Market recap August 23, not a trade suggestion.  Manage your own risk.  Never listen to others and if you don’t know what you are doing, consult your investment adviser.

This is what the charts are showing.

Check out our live day trading room.

The post Hourly Charts SPY and QQQ Market recap appeared first on Money Maker Edge Live Trading Room Stocks.

This is August trading with lower volume and sometimes extended range days.  Could take a few more days for trades to hold their support. Take your time here as tweets have been moving this market.  The pull back and forth between Trump and the FED are moving the markets almost daily.  It doesn’t look like the FED is going to acquiesce to Trumps pressure to drop rates to keep in line with other central banks.  We shall see.  Always trade with a stop and a target.

Watch list August 22 CYBR day trading set up.

Watch list August 22, MDB set up:

After a big run up today and about a $10 range, watching for a slight pull back and keep this direction.  Higher low on this with a target around the 50MA.  Watch for a volume increase into the weekend.

Watch list August 22,Reste ZM set up for day trading

ZM is bouncing off of support watching for this to gain support at the closing levels, wait for this to reverse for a clear entry.

Trade at your own risk, remember only you can be responsible for your trades.  Refer to the Money Makers Edge traders code if in doubt.

The post Live Trade Room Watch List August 22, 2019 appeared first on Money Maker Edge Live Trading Room Stocks.