How to Make Over $3,000 on a $225 risk in less than 4 hours

Welcome to another Trader Tip Tuesday where today we are going to go through an example of a trade that made over $3,000 on a $225 risk in less than 4 hours.

We preach that big winning trades are the key to being successful as a trader.
So this is the kind of example, kind of trade that we’re talking about when we discuss this. So this is anatomy of a 13.4 R winning trade in less than four hours. So this was in the s&p, this was last Tuesday, this is on January 11. And we basically got long the s&p at 856 in the morning, right here, at 461 31 and a half with a 4627 stop. We got a rally, we’ve got a retest of our entry level, and then we rallied again, all the way up to our target. We exited at 4692 12:47pm. So we’re in a trade less than four hours, and we made over 60 points on this trade. It’s $50 a point so it’s $3,025 in profit on a $225 risk.

In this chart, we’re gonna go back and forth. There’s two different charts here. The chart on the left represents two different timeframes, the weekly timeframe and the daily timeframe. The chart on the right represents a daily timeframe and intraday timeframe. This is a tick chart. When we trade with ticks, we only generate bars when the market trades, when the market ticks. If the markets really busy, we generate lots of bars, and if the markets slow, we generate bars very slowly. There’s a pace to tick bars that relates to the market volume. That’s one of the reasons I like it.

Trade Characteristics.
We’re going to talk about some of the characteristics of this trade. And we’ll go back and forth with the chart. So first of all, the market had been selling off the prior week. The market became oversold by the VIX being overbought, so we had indicators we used that basically identified the VIX being overbought, and we know when the VIX is overbought that the market is likely to rally. The markets actually oversold.

The next thing we had, which you could start to see on the chart is we had multiple timeframe convergence, in multiple timeframe support convergence. We actually had monthly support, which we didn’t see on this chart, we had weekly support, and we had daily support, and we had intraday support. We had a minimum of four timeframes all lining up in the same place to support the market. Here we have a weekly support, a daily support, and an intraday support right here. So there’s three timeframes of support that we can see on this chart. Plus, we have monthly, which is not even on this chart.

The third element we had is we had the trapping of volume on the daily timeframe. We teach a lot about analyzing volume traps as volume will be called migrating and pushing or is my as volume trapping where participants are now stuck and going to have to get out. We had a trapping of daily volume right in here. The market had sold off it rally late on the day on Monday, and basically trapped all the shorts well and so we were leaning into this area where all this volume was trapped to structure our buy. Then we had the daily timeframe had momentum that was really strong down but now that momentum started to decelerate. So now if we buy, we’re buying with momentum decelerating and we get to play for reversion to the mean, as the market works off its momentum. We have that here. We had a deceleration in momentum on the daily timeframe.

Lastly, we had intraday strong buy volume coming into the market. And we actually saw that here waiting the day the prior day so there was a lot of buying that came in off the lows. Now the market kind of made a retest, we’re all just buying came in and it found more buying. We found support at the weekly support, the daily support, the daily trap volume, the daily deceleration and momentum and the intraday volume, which led us to this move back up. This was a basically a reversion to the mean trade, but because we structured it through multiple timeframes, we were able to dramatically shrink the risk to only four and a half points. And we’re able to make over 60 points on a four and a half point risk.

When you make 13 times your risk when you’re right, you can be wrong a lot, and still be ahead.
This is one of the reasons I really liked this. Big winners are like aloe for sunburn. Big winners, basically cool off losses and help you recoup from losses really quickly. That’s what we see here.

Stay tuned every Tuesday for additional webinars that teach you different ways to think about trading performance to help you trade it elite level, similar to the trades that you saw today.

Hope everybody has a great week. God bless. We’ll see you next Tuesday.
– Chuck Whitman