High Caliber Trading With The Five and One Minute Rifle Charts

 

 

by Jea Yu, co-founder of UndergroundTrader.com

 

The markets are always shifting paradigms and evolving.  As Undergroundtrader.com goes into its twelfth year of operations, the methods we employ have also undergone a parallel evolution.  Static indicators and patterns have the least amount of foreshadowing pinpoint accuracy.  While they may look perfect in hindsight, the name of the game is to catch price movement right before or as it happens and exit with profits.  Measuring a dynamic entity like a financial market requires a dynamic set of tools and methods.  My legecy book “Full Circle Trading” (Marketplace Books, 2010) covers upon the refinement of the original methods to arrive at the full trading system that we employ daily.  Over 20,000 market trading hours went into the final ‘hand made’ development of these tools and methods.  I want to touch upon one of the key tools that I use daily on every single trade. 

 

War and military analogies to trading have been exhausted and overused.  However, one must understand that in any combat situation, you need to have your most viable weapon with you at all times, the rifle.  As they say, you can’t bring a knife to a gunfight, but you also can’t fire a gun underwater.  Therefore, the environment in which you use your weapon is vitally important.  This plays a key role in the effectiveness of your weapon and the outcome.  Keep this in mind when pulling out your rifle.  Treat it right and it will treat you right. 

 

The Rifle Charts

These are the 5 and 1 minute stochastics moving average chart.  However, the chart must contain the pre and post market data as well.  This extra data is what gives it the advantage and extra added kick.  I personally use the CobraIQ charts (www.cobratrading.com).  These are the only ‘rifle charts’ that I use and can recommend because of their consistency, accuracy and stability.  Each chart is composed of the moving averages price chart above and stochastics oscillator chart below.

 

The setup for the 5 minute chart is:

5 and 15 period simple moving average

20 period Bollinger Bands with 2 standard deviations (comprises three envelope lines with a 20 period ma in the middle)

50 and 200 period simple moving average

Slow stochastics with 15,3,5 setting (forms 2 stochastics oscillators)

 

The setup for the 1 minute chart is:

5 period simple moving average

20 period Bollinger Bands with 2 standard deviations

50 and 200 period simple moving average

Slow stochastics with 15,3,5 setting

 

 

Since these charts include the pre market and post market data, they are also the perfect weapon for pre market trading, if there is a trend channel on the 5 minute charts and then a mini pup pattern with a 1 minute trigger with mini pup. 

 

Mini Pups

A mini pup forms on the stochastics when a chart is trending and the 5 period moving average tests and bounces, thereby causing the stochastics to slope rather than cross.  In an uptrend, the 5 period ma will be tested by the sellers/bears in an attempt to break that price level.  The underlying stochastics will stall moving higher with the lead stochastics stalling as if to cross back down.  If that 5 period ma (moving average) is resilient enough to hold its price level, it will cause the bears to retreat.  Simultaneously, the lead stochastics will slope up rather than cross down.  This trigger a squeeze as shorts rush to cover and buyers come in off the fence resulting in an explosive trend resumption move.

For more details on mini pups, please refer to http://www.undergroundtrader.com/freetradingmaterials/ .

 

 

 

Rifle Charts in Action

 

 

Buy/Long Trade Setup

The ideal setup for a LONG is to first spot a trending stock on the 5 minute chart.  Let’s just assume an uptrend to make things easier.  The next step is to patiently wait until you get a 5 period ma test and red candle.  Once this tests, watch the 5 minute stochastics very carefully to see if it crosses back down or slopes up.  This is also where the 1 minute stochastics is critical as it will be the use trigger.  If the 1 minute crosses back up, then look for a LONG with the 5 minute mini pup.  The strongest trigger is when the 1 minute stochastics itself forms a mini pup trigger.  You can usually take these as soon as the mini pup forms and look to target the upper 1 minute and 5 minute Bollinger Bands.  The trail stops are easy… they are the 5 period ma breaks.  Therefore, in a nutshell, the LONG trigger is a mini pup with target at upper bbs (Bollinger Bands) and trail stop on the 5 period ma breaks.   You have your target, trigger and trail stop all in one setup!

 

 

 

 

Sell/Short Trade Setup

The Sell/Short trade is the inverse set up which is appropriately called a mini inverse pup.  This follows a downtrend that tests the 5 period ma with a green candle and rejects.  The rejection forms a mini inverse pup which triggers on the 1 minute stochastics cross down and even stronger on a mini inverse pup down.  The target is the lower bbs and trail stop is the 5 period ma.  This setup can be played with just the 1 minute charts alone, as long as the 5 minute charts have a channel.  Mini pups can be played for channel tightenings on the larger time frames (5 period ma to 15 period ma).

 

This is a very basic intro to the Rifle Charts.  Please take your time and watch to see how amazingly hair trigger accurate the reactions are.  These charts and patterns are linear throughout all financial markets, instruments and time frames.  This linearity is the basis of the Dopplar effect crucial to timing the markets (yes, it can be done!).  Use these tools only when there is a trend in place with a tradeable channel on that 5 minute chart.  Treat your weapon right and it will reciprocate.  To see these charts in action with the rest of the methods, feel free to sign up for a free 5 day trial membership to our live trading chatroom at www.undergroundtrader.com.  Full members get access to preformatted template charts of the above and more as well as access to live analysis, alerts and over 3,000 pages of training material.  Pace yourself and good trading!  Email me at jay@undergroundtrader.com if you have any questions.

 

Also, Jea Yu will be doing a live 4 hour seminar in at the Online Traders Expo in New York on Feb 15th, 2010, click here to sign up http://www.moneyshow.com/nyot/workshopDetails.asp?wkspID=E5D19E4FA5F14A7C969C077D49E774A4&scode=016272

 

 

Jea Yu is a co-founder of Undergroundtrader.com, an interactive active trader Chat Room and training site that has served n traders, fund managers and investors worldwide since 1998. His brainchild was voted Forbes Best of the Web for four consecutive years under the active trader category.   Mr. Yu has published Three best sellers through McGraw Hill and Marketplace books, “Trading Full Circle”,2010, "Undergroundtrader.com Guide to Electronic Trading" ,2001 and "Secrets of the Undergroundtrader",2003 as well as two popular trading videos titled "Level 2 Warfare" and "Beating the Bear" published through Traders Library,    He has been a featured speaker all over the country at various expos and seminars who enjoys a standing-room-only reception in the largest convention halls.  Jea’s energetic presentation style, along with his mastery of the materials being covered makes him an audience favorite.  He has been quoted in USA Today, WallStreet Journal, and the Financial Times.  Mr. Yu is an active contributing writer for TradingMarkets.com with over 60 articles to his credit.  

 

Please send any feedback or questions to jay@undergroundtrader.com