Trading Success Ep 2

Chris: Morning, Cam. Welcome back to episode two of Trading Success with Cam Buchanan.

Cam: Morning, Chris. Morning, everyone. Hope you had a good weekend.

Chris: We will get straight into it. So we had a big chat last week on Episode One around the Federal Reserve and obviously a big week coming up, which happened on Thursday morning. So I’ll just get your feedback, or your take on on what happened, and how it affected the markets?

Cam: Well, yes, the news came out very “dovish”, which basically means in financial terms that Jerome Powell, who’s the chairman of the Federal Reserve, said that they’re going to continue with their rate cutting program later in the year. So the market responded very bullishly to that. So we’ll go go into the charts later and show you that. It was good for the markets all around. It was fairly quiet leading into the week. And then on that Thursday, really took off.

Chris: You’ve got the NASDAQ and the S&P just continuing to climb upward.

Cam: Yeah, we made all time highs again on on Thursday, I believe, all time highs. So yeah, I’ll go into the charts and I’ll show you some really interesting things you can see if you wanting to learn how to read the charts and trade the markets can give you a good idea where the markets going in the short term. And I think at the moment, it’s really important to be able to trade short term at the moment, holding the long term positions in some assets can be a little bit tricky at the moment, because we are at these all time highs. So I think you’ve got to treat each day as it comes. And that’s the advantage of being a day trader is that we can be quite flexible. And we can trade the days because it’s there’s great advantage when you’re trading in the futures markets to make money within within hours. You know, you don’t need to be holding long term positions.

Chris: As you say, when they’re all time highs, at some point there’s going to be there’s going to have to be some sort of pullback or even arrest or some sort of consolidation. So as you say, day by day, taking advantage of what’s actually happening in front of you.

Cam: In terms of news, it’s going to be a fairly insipid week this week, there’s not much coming out. Thursday night, I think we have unemployment claims, and then on Friday night, there is a PCE index, which is basically the inflation, it’s like an inflation reading on goods which are targeted for basically the price of goods that individuals use. So it’s not a big corporations and big companies, industrial type usage. So it’s not as strong as the CPE read. So it’s more you know, it’s a lighter, lighter gauge, but it’s still an inflation figure. So that’s coming out on Friday.

There’s not a lot of news coming this week. So it should be you know, there’s not shouldn’t be a huge movements, I’d say. But we’re looking at the charts and see what could happen, we really need to work with volumes to see what the volumes are doing this week. We’ve also got Easter weekend coming up this week. So trading volumes may be a little bit light. But you can never tell right? You can’t have any bias on what’s going to happen in the markets. You don’t know when a big player is going to dump a big amount of contracts in the market or just have some this week, we might have just some mild selling based on fact we are at these all time highs and people take some profits over the last last couple of days of trading.

So, do you want to get into the charts?

Chris: Yeah, definitely.

Cam: Yeah. Okay, so let’s look at this chart. Now this is from this is the daily chart for the NASDAQ index. Okay, so the NASDAQ and the S&P 500 are the two most popularly traded futures contracts by traders around the world. So this is this is a daily charts. So this is the entire 23 hour data, right. So each one of these candlesticks represents 323 hours of trading, one hour is always closed for the the exchange to be reset. And then the market reopens. So, so what we’ve what we’ve seen here is, this was the first day move this particular day here, and you can see we had a very bullish day and we’ve created all time highs on Thursday.

Now on Friday, the market had a fairly quiet day, so we didn’t have any huge follow through up around these all time highs. Now one interesting thing to notice is that you see I’ve got this box around that particular candle. Typically markets like to fill those areas in. So what I’m thinking is going to happen this week leading into Easter unless we get any news out of the blue. I think this area could probably be filled back in by traders, and we’ll probably see a bit of a bit of light selling.

If we get a lot more volume coming in like a big what they call a “liquidation break”, big amount of volume coming in, then we could see this go down a little bit harder, and even, we could see a test of this balance zone here, you can see how this is very similar type of structure on this particular day. You can see how this area has been acting as what we call a “support level”. So the market has come back down into it a few times, but it hasn’t completely closed that area. So this area is like a gap in the market, and typically markets like to fill gaps. If markets can’t fill gaps, it gives you a fairly strong directional cue, the market is still wanting to go up.

So at this point in time, there’s this gap has not been filled. And also you can see down here, there’s another gap that hasn’t been filled down here. So if we ever do get some type of a correction in the near future, then these areas will probably likely be filled. Somebody asked me, Why does this happen? It’s just, it’s hard to tell why it’s just the structure of the market, the markets like to fill these gaps out. So one thing to look for this week is just if we see any selling, just watch how much volume comes in, because if you get a big amount of volume, and you can see down here, this is the volume at price at time. So with volume at time, you can see how many contracts were traded in that particular day. So if we start seeing a big day, you know, like a big amount of volume like that, you can see how that was such a strong selling day. If we see a couple of days with volume like that, then that’s like a bigger player is is selling contracts a big institution, so we should see a downwards move. So that’s kind of how the that market is looking.

Another interesting market to look at at the moment is the cryptocurrency futures markets. So the CME have a Bitcoin market, and they also have an Ethereum of market. Now Bitcoin is the largest of the cryptocurrency futures markets. This is a really strong sign about the value of cryptocurrency these days and how it except that it’s been and I think that’s been the issue with a lot of people not investing in cryptocurrencies, is that the adaption or the acceptance of that as a currency or a commodity, but it seems like it is now becoming a bit like a currency like a digital gold, or a commodity, like a digital gold. So it is definitely becoming a storehouse of value, and the one thing about it, it has a minimum supply as well, which makes it even more rare. When you’ve got a minimum supply of something, then it’s gonna hold the product in a higher value, right.

So basically what we’ve seen recently, with Bitcoin in particular, we’ve seen a very strong move in price. That has primarily been due to a couple of reasons. The main reason is the fact that in America, the SEC, which is the big regulator and finance over there, allowed a product called an ETF which is an Exchange Traded Fund. So they allowed I think about eight or nine big fund managers to create these ETFs so we have all these Bitcoin ETFs now which have just recently launched, so they have bought a huge amount of bitcoin off the exchanges. So the concern is, is that there’s a lack of liquid supply of Bitcoin, and that has moved the price up.

So if you have a supply issue, like a low supply and high demand, typically prices will go up. So we’ve seen prices go up over the last three months, you know, massive appreciation. The second part is also what’s called the halving, and the halving is coming up in April sometime And basically what the halving is it’s got something to do with the protocol of how the miners can create Bitcoin. So it basically makes it harder, the algorithms are harder to crack. So it’s going to cost more more energy, we need more computing power, etc to create these Bitcoins. So that also suggests that there’s going to be a less lesser supply of Bitcoins being created as well. So and we’ve seen, you know, we’ve seen recently some of the big some of the big mining companies in the US, like clean spark, and Riot, clean sparks probably the biggest one has had a huge appreciation in their volumes as well. And these ETFs as well have just doubled from their inception.

Do you want to have a look at the Bitcoin chart and just definitely what’s happening on the Bitcoin futures?

Chris: Sure, yeah, it’s a conversation that no doubt you come across all the time now is people asking about cryptocurrency, cryptocurrency, it’s still a very sort of popular word.

Cam: Yeah, there’s, that’s the thing. It’s that adoption now, and people are getting to that point where they can’t avoid it, like people have been resisting, and I think Vanguard been resisting it for so long, saying it’s just a gimmick. But now it’s becoming more and more accepted, particularly the financial industry in America is investing. So that’s a big sign. So you big fund managers like BlackRock, you know, State Street Vanguard, sort of starting to get more and more heavily involved.

So, this is a four hour chart, which is kind of like a macro scale chart. So we Day Traders, we typically trade off a five minute chart, which is a our execution chart, but we typically use a medium scale chart, which is like a 15 minute chart, and a large chart, which is like a 30 minute or a 60 minute chart to help us read the story.

Okay, so when you put a trading plan together, it’s like, you have to build a map of where you want the market to go. So the 15 and 30 minute charts is what we use as Day Traders, that’s our best map, to map where the the market can go. And basically, our five minute chart, or our execution chart, is like our car, that’s like our vehicle to get us to where we want to go. So we use these charts to help us navigate where the market could go. And it gives us a lot of market generated information.

So this is a macro style chart. And I’m using the macro chart, because I just want to show you the size of this trend, which started back in January, pretty much around the 21st of January. So almost three months ago, you can see the rally we’ve had, has been quite massive over those 90 days. This particular indicator I’m showing you here is a volume profile. Volume is very important as an indicator. So you can see down here, this is volume at time, as I said before, so this tells you what the volume during that particular time period, whether it’s four hours, or if it’s a daily chart, or five minute chart, you can collect the data or collect the volume based on that particular timeframe.

So what this does, this indicator, it actually shows you the amount of volume which was exchanged, or traded at price. So this is what this does. So basically, it’s volume on this side of the axis rather than this side of the axis. So the cool thing about the volumes at the moment is we’ve had this massive rally, and we hit all time highs up around 74,000 US dollars on the Bitcoin Futures market and then we had a correction. So this is just this like we were talking about with the NASDAQ market. This is kind of what we’re also waiting to occur on the on that market is that correction, but we haven’t had that on the NASDAQ but you can see we’re having a slight correction at the moment. So this is pretty typical, apparently historically, before they come into the having that there is some whatever a correction and it’s it’s not a huge correction.

The correction has been it does look big, but these these crude their currency markets are more volatile than normal index markets or stock markets.

So the market did come down to around about 61,000 or so just under 61,000. So it did drop, say, around about 13,000 US dollars over the last week or so, I think the high was around the 14th of March. And then we came down into the solstice, or sorry, the equinox around the 21st of March, where the market turned up from pretty much around the same time the around the the FOMC news, the market turned up. Interesting to know, just when you look at this chart, you can see this yellow line across the chart here, which I’ll show you, that there. That line there just represents the most traded price in this whole rally. Typically what happens in markets is that a lot of people and this is like what they call the winner’s curse or the greater fool theory. It’s like people always come in at the end, right? And, and a lot of people, you know, they just go, if I don’t get an hour, I’ll never get in, right. That’s just human emotion and human impatience. And so many people just jump in at the end.

What happens is a lot of big players take advantage of that mentality, and what we’ve seen here is that the market just sold off. So a lot of these short-term players, weaker hands, probably jumped in at the top of the market. This is just a typical bit of a bit of a stock run, it’s just trapped some short term players that may have got in, try to squeeze a little bit more out of this rally, and they’ve basically been caught, and then bigger players just started to sell here and made some profit.

So what’s happening down here is we’re probably going to likely see an accumulation zone around here for maybe a month or so before the market really continues. And they’re expecting this market to rally, you know, it could double in value from here after the halving. But typically, the market after the having, historically, the markets tend to rally harder after that period. So this is just probably a typical correction and just a consolidation period. But notice where the market went up to just recently where the market stall was right at the most Fairest price.

So markets will probably, you can see today, the markets already opened up. So you can see that big gap here. That’s just the weekend because Bitcoin doesn’t trade on the Futures Exchange over the weekend. The Futures Exchanges are closed, Saturday and Sunday, and they reopen on Monday morning in Australia. However bitcoin does trade, it doesn’t stop trading. So there was trading throughout the weekend, I think the market actually went down to around about 64, I think was the lowest price on the weekend. But the markets been rallying, I think Sunday night, and we’re heading back up to this $68,000 round number, which seems to be the kind of balanced price.

All right, so I think the smart money is probably accumulating down here at the moment, because they’re buying at what’s called a discount. So if another thing you can do is just if you just run a Fibonacci tool over the high and the most recent low, you can see how that $68,000 Price kind of aligns with the 50% of the range. So this would be considered a discount price at the moment. Whereas when the market is in the range here, this would be considered a bit of a premium price. So if the market gets up over the 50%, so over 68,000 You really want to see volumes coming in back in that but really strong volumes. Otherwise, if the market just moves up on fairly weak volume and goes up here, it’s probably going to come back down here, not really ready to break out. So I think there’s a bit of time if you are looking at, you know, trading in this market or even investing in this in this on this contract.

The Bitcoin contract is probably a little bit of time before we’ll see a really big rally. But in the short term, I think there’s some really good trading opportunities within the day. So I’d be watching that 50 $60,000 mark for an area to potentially short if the market gets back up here and shows weakness then there’s probably going to be an opportunity maybe make some money shorting around that level. And it also ties in with what we call a liquidity zone up here as well, which is an area where there’s going to be potential short term traders that have been short down through here that are protecting a bit more of a short, they’re going to have buy orders back up here. So that’s going to potentially attract a bigger seller that’s consumed those sell orders. Are those buyer what is up here? So this is going to be an interesting area, the market is going to potentially find some support or resistance here in the in the short term.

Chris: Yeah, fantastic.

Cam: And there’s some great little tools you can use, you know, we use a lot of price action analysis, but also the volume analysis, and you can see, you can see what the volume analysis, where the volume has really been concentrated over the last… Just change indicator, because it’s snapping. Again, this is just one of the our indicators we use. I just ran it from the low, right, I just want to capture all the data, capture all that data over that swing, I want to see all the volume.

You can see they’ve dropped, you can see we had this little flash sell off here, there was a lot of volume on that particular, two to four hour period, and within eight hours of fairly harsh sell off on that particular day. But you can see where the market stalled was right at the edge of that volume profile. You can see down here, this area down here, around $61,000 is acting as a support level. So if the market comes back around this 61,000, that’s almost like that, showing you where the bottom of the range is at the moment. So if this market does sell off from 68, there’s basically about a $7,000 move down to 61,000. So the that’s going to be the next area of of support in the market.

It’s so handy, because it’s showing you where traders are stepping into the market and where they’re not prepared to step in. So and that’s really what we want to do, as a day trader, or as a small time trader, we don’t have the power to move the market, but we can see where the majority of traders are coming into the market. And that’s what we’ve got to use. We’ve got to be smart to you know, Time our trades, use the data, use the the analysis, and then we can we can profit from those moves in the market.

Chris: Yeah, fantastic.

Cam: I think that’s about it today, guys. If you’ve got any questions about what we do, then please reach out to International Day Trading Academy. I’m the founder of the International Day Trading Academy and passionate about day trading. I think we’re so fortunate that we get the opportunity to share this knowledge with people and enlighten people on how to do this the right way. And empower people to do it, you know, using good strategy and not using a motion trading based on strategy and and when you’ve got a strategy, you can be so more patient and be more relaxed in the markets and let the trade do its thing.

Chris: Yeah, fantastic. Cameron, thank you very much.

Cam: See you next time. We might have a look at Gold, and silver, some other commodities which are going to be going through some interesting price movement in the next few months, I’d say. Thanks, Chris, bye, everyone