Best Trading Strategy for the Market's First Minutes

This podcast explains a trading strategy for the first minutes of the market, focusing on identifying a 'narrow state' and exploiting powerful breakouts. The strategy involves entering a trade based on the initial powerful bar, followed by adding to the position on the first color change and then implementing protective stops, aiming for a systematic and disciplined approach to trading.

Identifying a Narrow State

• 00:00:00 The first step is to identify a 'narrow state' in the market, where the 20 and 200 moving averages are relatively flat and close together. This indicates a period of low volatility, which can precede a powerful price move. The speaker emphasizes that a narrow state suggests potential for a breakout to either the upside or downside, hence the need to be prepared for both scenarios.

Power Bar Entry

• 00:01:17 When the price breaks out of the narrow state with a strong move ('power bar'), traders should enter a position in the direction of the breakout. If the price breaks up strongly, buy. If the price breaks down strongly, sell or short. The speaker underscores the importance of waiting for the breakout and power bar before initiating a trade.

First Color Change Add

• 00:04:27 After the initial power bar entry, add to the position on the first color change (the first candle that indicates a change in direction). This increases the position size while still respecting the original trade direction, building on the initial entry. The speaker advises building trades with an initial and color change entry.

Protection

• 00:03:38 Protection is necessary to manage risk. The speaker emphasizes protecting the trade by placing a stop-loss order. The stop-loss order can be placed under the power bar, or, depending on the context, under the entire narrow state. This approach is designed to limit potential losses if the trade goes against the trader.

Systematic Approach

• 00:09:43 The speaker stresses that this strategy provides a systematic approach to trading, which helps eliminate guesswork and emotional decision-making. This process enhances discipline and allows traders to consistently follow a defined set of steps for each trade. The speaker believes this approach leads to improved trading outcomes.