The STRAT
The STRAT
All things strat related for stock trading, a methodology created by Rob Smith.
Knowledge should be collaborative and shared, not behind a paid wall.
Definitely a work in progress. Not financial advice.
Table of Contents
Overview
o Candlestick Overview
o STRAT PART 1 - Candles and Pricing Action
o STRAT PART 2 - Other Factors
o START PART 3 - Actionable Signals
o STRAT PART 4 - Misc
Detail
o Cheat Sheets
o Acronyms and Terms
o Social Media
o Links
o Tools
Overview
Candlestick Overview
Before beginning you have to have a basic understanding of candlesticks.
Candle sticks have 5 basic parts.
WICKS
o 1 - Top wick / high / very top of the candle
The highest price the stock trading during the given time
frame of the candlestick
o 2 - Bottom wick / low / very bottom of the candle
The lowest price the stock trading during the given time
frame of the candlestick
FILL
o 3 - Open
The price of the stock at the open of the given time frame
(top or bottom of the fill depending on the color, more
below)
o 4 - Close
The price of the stock at the close of the given time frame
(top or bottom of the fill depending on the color, more
below)
o 5 - Color
Green / Hollow / Empty
3/4 The open was lower than the close, it opened at
the bottom and closed at the top (price went up)
Red / Black / Full
3/4 The open was higher than the close, it opened at
the bottom and closed at the top (price went down)
Example
o
STRAT PART 1 - Candles and Pricing Action
1 Candle
o Names:
1 Candle / Inside Bar / Inside Action / Consolidation /
Sideways
o Technical:
Occur when the current candle falls completely within the
prior candle
o Meaning:
Balance, equilibrium, buyers and sellers agree on price, no
one is in control, trying to determine where price is going
next
o Detail:
Never trade a one bar, wait for the consolidation to stop
then it's time to get into a trade
o Example
2 Candle
o Names:
2 Candle / Directional Bar / 2 Down / 2 Up
o Technical:
Occur when the current candle takes out one side of the
prior candle
A 2 down means it took out the previous candle's
low, but failed to take out the high
A 2 up means it took out the previous candle's high,
but failed to take out the low
o Meaning:
Sellers are selling it down or buyers are buying it up but not
both, a 2 can turn into a 3, but never a 1
o Action:
The market trades in the direction of the most 2's, but only
trade 2's with continuation
o Example:
3 Candle
o Names:
3 Candle / Outside Bar / Discovery Candle / Mother Bar
o Technical:
Occur when the current candle takes out both sides of the
prior candle
o Meaning:
Price discovery starting over, buyers willing to buy it up,
sellers willing to buy it down, choppiness
o Action:
Never trade a mother bar, price discovery is happening,
wait for further confirmation one way or anther
o Example:
Hammer
o Candle that looks like a "hammer"
o Little to no top wick, open and close are very close to the top of
the wick, 75% of the candle is mostly wick at the bottom
o Action:
Entry as soon as the next candle breaks above the top, or
top, wick of the previous hammer candle
o Picture:
Shooter / Shooting Star
o Candle that looks like a "shooter" / upside down hammer
o Little to no bottom wick, open and close are very close to the
bottom of the wick, 75% of the candle is mostly wick at the top
o Action:
Entry as soon as the next candle breaks below the bottom,
or bottom wick, of the previous shooter candle
o Picture:
Inside Bar
o Inside bar (explained above)
o Action:
After price is done consolidating it will break up or down,
take the break at the top or the bottom of the previous
inside candle depending on which way it goes
TTO - Triangle They Out
o Inside action on a larger timeframe
o As consolidation is happening, things will get "tighter" toward a
point and eventually break out up or down and go fast
o Picture:
Detail
Cheat Sheets
STRAT Cheat Sheet1
STRAT Cheat Sheet2
Candlestick Cheat Sheet
Kicking Patterns
Acronyms and Terms
TERM MEANING DESCRIPTION
EOD End of Day End of the stock trading day 4PM EST
TERM MEANING DESCRIPTION
Full Time Frame All time frames "match" - they are all
FTC/FTFC
Continuity up or down
NATH New All Time High Stock made a new all time high
NHOD New High of Day A new high stock price of the day
Social Media
Youtube
https://www.youtube.com/user/smithsintheblack
https://www.youtube.com/user/ssabatino84
https://www.youtube.com/channel/UCYllJ4eRU4wDVSbZ9pHIJKA
Links
News
CNBC - premarket
o https://www.cnbc.com/2021/06/18/stocks-making-the-biggest-
moves-in-the-premarket-adobe-smith-wesson-orphazyme-
more.html?&qsearchterm=premarket
Fed Reserve Calendar & Events
o https://www.federalreserve.gov/newsevents/calendar.htm
Economic Calendar
o https://research.investors.com/economic-calendar/
Upcoming Earnings
o https://www.earningswhispers.com/calendar
Blog
o https://acquirersmultiple.com/blog/
Newsletter
o https://litquidity.co/pages/newsletter
Analysis
Tools
Scripts
Misc
Exchanges
TD Ameritrade
o https://www.tdameritrade.com/home.html
E-Trade
o https://us.etrade.com/home/welcome-back
Webull
o https://www.webull.com/center
Interactive Brokers
o https://www.interactivebrokers.com/en/home.php
Robinhood
o https://robinhood.com/us/en/
The third scenario is where the second bar takes out both sides of the previous
range. Thus reversing
it’s attempt to trend as you can’t have a scenario 3 without going scenario 2 first.
This is
known as an outside bar .
The fact that scenario 3 exists is one of the most important things you can ever
know when it comes to understanding price action. The phenomenon that ranges
gets taken out on both sides is the only way to properly gauge the potential
magnitude of an expected move
Since once a scenario 2 fails, We can combine more of what I’m going to show
you to expect the range to indeed expand again to for the outside bar. This
phenomenon is possibly the biggest miss in our industry. Almost every book on
technical analysis claims that the broadening formation is extremely rare, when
the truth is it is one of the only things that can possibly happen. A broadening
formation is a pattern where ranges continue to expand on both sides, thus an
outside bar is a broadening formation when you shorten the time frame of the
chart. It must be because by definition the range is expanding on both sides,
Here’s Google on a 30 minute chart over the past few days and it’s
corresponding outside bar on the daily chart.
What do we know to be true?? There are only 3 scenarios that can possibly play
out from one bar to the next , it is impossible for price to do anything else, and
that range expansion on both sides indeed occurs because outside bars exist. So
what else do we know to be true? There is always a debate when the market is
dropping of “Is it near a bottom?” This is to say that most will use subjective
analysis to attempt to identify what a reversal is. You’ll hear things like
“Capitulation volume” etc. The truth is there are only 4 ways that price can
reverse. First, Scenario 2 in one direction followed by a 1, then a scenario 2 back
in the other direction.
Second, a scenario 2 in one direction followed by a 2 in the opposite direction.
Third, Scenario 2 fails and goes scenario 3. An outside bar.
4, Scenario 3 occurring at a high or low followed by a 1, then a 2 back into the
previous range.
This occurred on the weekly chart of AAPL on it’s recent low.
Feel free to go look at any chart and you’ll quickly notice any reversal occurred
per one
of the 4 set ups I just showed you. It is impossible for price to reverse any other
way. One
of the most tiresome conversations of 2018 was, Is GE a buy?? So many people
went back and forth
When all you needed to do was wait for the 2-2 reversal on the monthly chart
when it broke
Above $7.95.
Not to mention October’s outside month to get short, but I mention it.
Another problem many traders have is relating the term reversal to a major top
or bottom.
That’s not true. They occur all the time and are extremely useful during a strong
trend.
You may have heard the term or you use the term “I’ll buy on a pullback.” My
usual response is “What’s a pullback?? 2 cents? 50 cents? 2 bucks?” The usual
responses are things like “It’s coming into my moving average or support level”
or “It looks like it stopped going down!”. So, we can define that a successful
pullback is corrective activity that ultimately resolves higher.
Therefore, any successful pullback that ultimately resolves higher also is a
reversal and must be one of the 4 reversals I just showed you. This must be true
as there is no other possible ways for that to occur.
This is not to say that major tops and bottoms don’t have these reversals as well,
they do as these are universal to all price action. Had you known this in October,
you could have easily identified the reversals on the monthly charts of the
broader averages. IWM 2-1-2 reversal.
The 2-2 reversal in monthly SPY.
The failed 2 goes 3 in monthly DIA and QQQ.
You can also see the 2-2 reversal in weekly SPY which called the most recent
low and has still not
been negated by another reversal.
It is common knowledge that most hedge fund managers don’t outperform the
market. Here’s how badly you would have destroyed the market based on what I
just explained to you using a macro yearly chart of SPY.
From 1988 to 1999, all 2’s in the same direction. 2000 went 2 but then 2001
triggered the 2-2
reversal to get short. 2003 was an inside year then 2004 triggered the 2-1-2
reversal to get back long. 2004 through 2007 were 2’s. 2008 triggered the 2-2
reversal to get back short. 2010 then triggered a 2-2 reversal of 2009 to get back
long. It’s been 2ing ever since except for 2016’s 3 year.
So what do We know to be true? There are 3 universal scenarios and 4 types of
reversals. So how do we put this all together? You may have noticed that my
examples are on several different time frames. One of the biggest mistakes
traders make is not using multiple time frame analysis . You need to use at least
4 time frames to understand what you are truly looking at. Most importantly,
you need to understand that charts are simply visualizations of statistical data.
Once you understand how to analyze the data the way I’ve just shown you, the
clearer things become to what is truly occurring. To give an understanding of
how little you know if you don’t, consider this. If a daily chart updated at noon
instead of the opening, you would see a completely different chart. If a 30
minute chart updated at 15 and 45 minutes past the hour, it would also be
completely different than a standard 30 minute chart. You would also have 10
different looking charts if you had weekly charts that updated every day of the
week on the opening and each day at noon. So what you think you see on any
chart is basically irrelevant to what is truly occurring. You are a prisoner of how
software wished to present the data to you. So, an outside bar may not actually
be presented, but we know that phenomenon exists. For instance, look back up
to the yearly chart of SPY. If you look at the sell off from 2007 to 2009, you’ll
notice that those 3 years were completely outside the previous 10 years. If this
was a 3 year chart that updated in 2007, it would be an outside bar.
Multiple time frame analysis can help mitigate such problems and continue to
gain more insight on what is truly happening. I basically use the Monthly,
Weekly, Daily, and 60 minutes as My major time frames. As you can see I also
use macro Yearly and Quarterlies for the bigger picture. During periods of high
volatility, the shorter term time frames are equally as important as in October an
hourly bar could have the range of a monthly bar in September. So, by lining up
the scenarios and reversals across multiple time frames, We don’t think, We
KNOW what is happening. if we have a reversal on a monthly chart, We then
know to look for reconfirming signals on the shorter term charts. Multiple time
frame analysis as gives us important information about what other market
participants are doing. This next universal truth to price action is called the Time
Frame continuity principal. Here is a chart of HON on the 4 major time frames.
You’ll notice that all four charts are green because they are trading higher from
each opening. What we know to be true that when all charts are green and the
openings are at separate times, the aggressive participants by time and price are
on the buy side and taking the offer. You’ll often hear the reason that prices rise
is because there are “More buyers than sellers.” That’s not true because all
buyers need to have a seller to aggregate with. A buyer may sit on the bid and
the price won’t move. However, during periods of full time frame continuity to
the upside, the buyers are all aggressive enough to be taking the offer. This
absolutely must be occurring as there is no other explanation. So, based on what
we know to be true is that there are 3 scenarios, 4 reversals, and the time frame
continuity principal. When We combine all three we greatly increase our
probability of being right. Ideally, We get one of the reversals on one or more
time frames that back into full time frame continuity. This means that we have
had corrective activity with a high probability of resolving higher as every man,
Woman, and Bot is back to taking the offer. So what do we know to be true?
When you put together the concepts I’ve just presented to you, I already know
what your winning and losing trades look like. I highly suggest that you use at
least 4 time frames and keep this checklist on your desk. Feel free to review any
trade you’ve ever done and compare it to what I just showed you and it will line
up. Here’s the check list.
Losing trades look like…..
1.Chopped up trading a scenario 1.
2. Scenario 2 going against you.
3. Scenario 3 going against you.
4. Time frame Continuity going against you.
Winning Trades look like….
1. Scenario 2 in your favor.
2. Scenario 3 in your favor.
3. Time frame continuity in your favor.
And that’s what I KNOW to be true.
Rob will have been trading for over 30 years. He was a member of the
Chicago Stock Exchange for 16 years where he was an OTC and Listed
Specialist , Independent Trader, and research analyst for several firms. For the
past 8 years he has been teaching his
methodology and you can follow him on YouTube
at https://www.youtube.com/user/smithsintheblack or Twitter @Robintheblack.
TOS
1 Bar Rev Strat Day: 1-2D scan: http://tos.mx/bJOPhPN
1-2U Scan: http://tos.mx/6V6infz
2 Bar Rev Strat Day: http://tos.mx/k0mlcRO
2 up possible 3 short into open: https://tos.mx/uf4s90u
2 Up Red Day: http://tos.mx/EDU5xn3
2 up shooter weekly: https://tos.mx/ZwO4pwl
2% Off Last Months Highs & > 10% from 252d High: http://tos.mx/GQuWdk9
2u to 3d: http://tos.mx/XvmtNQq
2U-3D: http://tos.mx/vZMrOLs
2x Inside Month: http://tos.mx/O19mjam
3-1 Scan: http://tos.mx/tKXTWdX
ADR: http://tos.mx/xXthESo
Anchored VWAP 2021: http://tos.mx/F4jKxbl
ATR Label: http://tos.mx/eDRGPJm
Broadening Formation: http://tos.mx/f8hEfJI
: http://tos.mx/2YRrfU5c
Daily 2d 3up: http://tos.mx/aZ0PjPThttp://tos.mx/f8hEfJI
Daily 2u 3down: http://tos.mx/9U2Cvvc
o Double Inside Day: http://tos.mx/T8Qq6CY
2 D Green Day: http://tos.mx/TNBQxIM
2U-2D Week: http://tos.mx/lAwNJVc
Double Inside week: http://tos.mx/ggNfej2
Double Inside Week: https://tos.mx/gExMrmJ
Inside week scanner http://tos.mx/IezLU5T
HAMSHOOT: https://tos.mx/jtv0W8M
MMInside Hour: http://tos.mx/jOW2FlM https://tos.mx/jtv0W8M
INSIDE HOURS 2: http://tos.mx/KktbH0k
312 BULL - https://tos.mx/FZRUMIl
FTFC With Arrows: https://tos.mx/xfZEnLv
Gap Up: http://tos.mx/1kDn8Wa
Green/Red TFC: http://tos.mx/rYd4rhZ
Imbalances: http://tos.mx/08g5FuE
Inside 15: http://tos.mx/tN37fFM
Inside 30: http://tos.mx/ElrVy5o
Inside Day (ATR>5): http://tos.mx/4eVM1lj
Inside Day ATR 3+ scan: http://tos.mx/uMhx2ix
Inside Day Yesterday FTC Up: https://tos.mx/jVn9nZf
Inside Day: http://tos.mx/Kef6LRV
JAM Volatility: http://tos.mx/uIEa2nP
Kicking Bear: http://tos.mx/RJDDjp5
Kicking Bull: http://tos.mx/IigzVfx
Leaders & Laggers Custom: https://tos.mx/6RiNtf5
Leaders & Laggers: http://tos.mx/S8B534Z
Leaders Laggards TFAANG: https://tos.mx/jHDr3ry
Liquid Options: http://tos.mx/8NL7E90
Mind the Flip: https://t.co/5x9VNEwryI?amp=1
Monthly Rev Strat: https://tos.mx/eLy347U
Monthly 2up to 2down: http://tos.mx/t5rTDuD
Monthly 2down to 2up: http://tos.mx/K8mKJxI
On Chart Strat FTC2: https://tos.mx/goBRH2b
Outside Day Scan: http://tos.mx/b8kk0tl
Outside Hour Scan: http://tos.mx/ytJJj6N
Pivot Machine Gun Daily: http://tos.mx/HqDIH5V
Pivots w/BF: https://tos.mx/1dIAlIl
PMG Daily: https://tos.mx/XB8H00P
Rev Strats/312/212 Day OTC: https://tos.mx/OczgOWQ
Rip Pre Market:
1 Bar Rev Strat Day
1-2D scan
2 Bar Rev Strat Day
2u to 3d
2x Inside Month
Q W@ AWw3☺️g6
Scan Query: https://tos.mx/qFaZPA7
Sector Change % Label: http://tos.mx/TsidmSY
Sector Strength: http://tos.mx/lNL8rJU
Spread Custom Columns: http://tos.mx/lVfxL52
(adjust time frame to an intraday setting of your choice)
Strat Basic TFC: http://tos.mx/2o5JeAW
Strat HLM V2: https://tos.mx/7TQya1g
Strat HLM: https://tos.mx/qrOayCC
Strat Inside Bullish 2-2: https://tos.mx/UINMm6N
Strat Inside Bullish TTO: https://tos.mx/KK75EUy
Strat Inside Bullish: https://tos.mx/EqCPd29
Strat Inside Quarter: https://tos.mx/2GhMcxK
Strat Open Levels: http://tos.mx/bxcDOka
Strat Pivots: http://tos.mx/ku6GTgR
Strat&Reversals: http://tos.mx/rbd6laM
TFC & ADR: https://tos.mx/4vrxzpx
Think Script Study (auto strat and FTC Labels): https://tos.mx/PPUoZBa
o This script will number each candle, also will show FTFC and also
alert on reversals
Tick Study: https://tos.mx/t5p4Pt
Time Continuityhttp://tos.mx/rYd4rhZ
Ultimate Volume: https://tos.mx/1soHWre
VP 2 Grid: http://tos.mx/j2pzH1shttps://tos.mx/PPUoZBa
VWAP Boulevard: https://t.co/pdAIr60BZ1
X-2 Rev Up Week: https://tos.mx/bnIFd83
Yesterday’s highs: http://tos.mx/2Po5vIg
Yesterday’s lows: http://thttp://tos.mx/2Po5vIg tos.mx/FfFMrrQ
• https://youtu.be/HJAkIFoMkAA
• https://youtu.be/3iRnvulahQM
• https://youtu.be/0liK0wIXR_E
@RickyZane85 Resources
(updated on 8/1/2021)
Github
o https://github.com/rickyzcarroll/the-strat
o General readme information regarding TheStrat that I documented when
I started learning, hopefully it will help you.
o Tons of information and links.
TradingView Scripts
o https://www.tradingview.com/u/rickyzcarroll/#published-scripts
o All of the scripts I’ve created in TradingView to help visually assist with
the strat
StratScanner V2
o https://docs.google.com/spreadsheets/d/
1mAKDyabWX2Z7wN2NkPuCT_f-nJCbfu73QaaBHmRzv78/
edit#gid=636936577
o Using paid data for this one, so it should be more reliable. Updating this
routinely. Now includes ATR.
Strat Journal
o https://docs.google.com/document/d/
1itCdryl2e_eS3ouza9ewNWWOI86JQAS9ewJ0q4mFoIE/edit?
usp=sharing
o A template I use to journal my plays
StratScanner V1
o https://docs.google.com/spreadsheets/d/
1gdHpSeyXwEEYmq50_g4BH1xn7ZDEH6Y63B8241NelKE/edit?
usp=sharing
o First attempt at a scanner, trash now not updating it. I created it to scan
for strat setups after the day is over because I don’t like TOS and TV
limits to 40.
o This uses the GoogleFinance function (which is free and not super
dependable)
StratScanner Mini V1
o https://docs.google.com/spreadsheets/d/1o8OTx8qmnyCM-
uedchrJqeyFGKXr_es5KzQXFJaI-HY/edit?usp=sharing
o Mini version of V1 that allows users to enter their own stocks… no
longer using/supporting this one.
Scripts from Alex’s Discord:
o LINK:https://docs.google.com/document/d/
1itCdryl2e_eS3ouza9ewNWWOI86JQAS9ewJ0q4mFoIE/edit?
usp=sharing
o TOS, TV, Ninja Trader, all sorts of fun scripts for the Strat