The Strat Overview ( #thestrat )

0:06 [music] Happy Saturday. Today I'm going to be going over the Strat. Uh, pretty much just a general overview. I won't go into too much detail into each and every single part since I don't want to have you guys here for five hours. Uh but essentially we're just going to go over, you know, what the strat is um and the different components of it. Um like the candle combinations, the scenarios, broader informations, time continuity, what they are, what they mean, and how we can, you know, combine all of them in conjunction when we are trading the Strat. As always, I am not a financial adviser.

0:54 This is not to be taken as financial advice. This is simply for educational purposes. And with all that being said, we'll get started. Um, if I do pause for a little moments here and there, I'm just looking at my screen to make sure I'm following all the points in my um other screen here that I have. Anyway, so the strat, what is it? The Strat is basically a uh trading strategy created by Rob Smith. I believe he was a floor trader. Not sure for how long, but quite some time. Um it's pretty much just price action simplified. So,

1:39 um with the Strat personally to me, it was one of the best things that I've ever learned. It's been about two years now since I've been using it and to this day still works exactly the same. It's to me it's perfect. It works with anything. Um since it is based on price action um and you know whatever has candles you can use it on it. Um there are different instruments that it's more efficient on like for example um I mainly trade options with it and regular stock or like equity crypto as well but if I'm trading futures I use a different method for that which I won't uh touch on today or can't really speak on anyway. Anywh who so with the strap like I mentioned was created by Rob

2:26 Smith. And to start off, you may be looking at my chart and being like, Desi, what are all these numbers under your candles or above them? So, with the Strat, there are three scenarios that Rob mentions, and I'll zoom in so we can look at it a little cleaner. So, we have a scenario one, which if you are new to trading, you may know that as an inside bar. An inside bar stands for or one bar stands for consolidation. um you know there hasn't really been a direction where the market wants to go. So it's kind of just like um figuring out what it wants to do. An inside bar pretty straightforward doesn't break the low does not break the high of the previous candle which the

3:12 name gives it inside bar. It's inside the previous bar or a one scenario. Scenario two, it would be a two bar either breaking the previous high being a two up or breaking the previous low which will be a two down. And then a scenario three would be breaking the previous high and the previous low of the previous bar. So for example, we have the scenario three right here. broke the high and broke the low of the previous candle. So, we have our three and then a two up. We have this candle here. Broke the previous high. This will be a two up candle. This

3:58 one right here. Another two up because it broke only the high right here. Have a two down. Broke only the downside. Excuse me. So, of course, those are the three scenarios. What we also want to look for, you'll hear this term called an actionable signal. An actionable signal, pretty straightforward, is simply a hammer candle or a shooter candle, which is, you know, a hammer or reverse hammer. We have a shooter candle right here. We have a hammer right here. Of course, um you can, you know, this is a cleaner hammer here with a green body

4:43 and the body's a little bigger than, you know, these examples here. But actionable signals, uh, pretty much give you an indication if there's going to be a potential reversal. So, if there's a hammer or actionable signal on a downtrend, more than likely, it's going to reverse. As we can see here, price reversed down, actionable signal, price reversed up. We have here an actionable signal to the downside, a shooter, a reverse hammer, and then price reverse to the downside. Now, it's pretty simple in the sense of what I love about the Strat the most is, you know, getting in. What are our entries? What are our stop- losses? What are our

5:29 targets? With the Strat, it makes it extremely simple. And I'll zoom in so we can see some examples. Uh let's use let's go here. So with the strat in the with the different scenarios that we discussed earlier, you can essentially um formulate a trading plan or a trade depending what you're looking to take. For example, here let's pretend this candle and over does not exist and we only have these two candles, right? So here we have a 21 setup. If it breaks the high of this wick, we're going to go

6:16 long. If it breaks the low, we're going to go short. So our entry is going to be as soon as this candle breaks this high. And something to note with the strat, we do not wait for candle closes. As soon as it breaks that top of the wick, you get into the trade. Your takerit is going to be the previous candle high. So, if we're going long and I enter here, when this candle triggers me in, I'm going to take profit. Well, one of my targets will be right here, target one. And then of course you can look to the left. This will be target two even though they're close by. And then of course you can use target

7:02 three as the next high of the candle. And I'll show you another example. Uh let's use this right here. So in this case here it did trigger short first. It went two down and then the buyers brought it up and then made it a three up. You can also see this as an engulfing uh an engulfing bar. So as soon as it went three up again our entry is above this wick. First target this candle high. Second target this candle high. Third target this candle high and so on and so forth as you know price continues in your favor.

7:48 Now, something to keep in mind is let's see for stop losses, there's two different areas where you can use your stop loss. And I'll go back to this example here with this 212 up. For me, I'm more of a tight stop-loss kind of guy. So, I like my stop loss to be under the trigger candle. The trigger candle is the candle that gets us into the trade, that triggers us into the trade. So this candle here once it triggered 212 up my stop loss is going to be right under this candle. Now some people may like to use the setup candle as their stop loss. This

8:34 one right here being the setup candle. So if you take this 212 up, you can put your stop loss down here or down here. Again, for me personally, I like putting my stop loss under this under the trigger candle, not the setup candle. And it is situational where sometimes I will use the setup candle as the stop-loss. For example, we have here this 312 up, right? So for me, this 312 up, this will probably be the only setup or a 212 up with a dogee or a hammer where I would use the setup candle as my stop loss instead of the trigger just to give

9:20 it a little more room. So moving on from candles and the different scenarios, the next component of the strat are broadening formations. Now what are broadening formations? Broadening formations are essentially support and resistance for strat users. And uh let me just bring this over and delete these that I drew prior. So broadening formations um generally when I'm looking for them, I would draw them off of three candles since three candles on lower time frames are broadening formations. I won't touch

10:06 up too much on that today, but I'll probably give a little example. So for example like I mentioned broader informations being support and resistance for strat users. Uh let me draw that there and then let me draw this here. This is on the yearly chart. So now let me go down to the weekly and oh whoops. I have to actually bring this way back. Let's do max available for the week and then let's uh zoom in here. So as we can see with our broader information that I drew on the yearly, we can see how price is respecting this these levels. So every time it gets to the top, it

10:52 comes down, hits the bottom, heads back up. In this case here, it rejected, came back out and kept on trying to retest and break that level. Sellers kept on bringing it down, went to the BF here, came back up, came down, bounced off again. So you can see it's almost pinpoint accurate. Exactly how why it's that accurate beats me. I'm just here to trade. I'm not I'm not the ones who are programming the market. But anyway, as we can see here, um, and I'll touch back on this later on when I combine everything, but as we can see here, we're brought on informations. Like I mentioned, support and resistance.

11:37 We keep on trading in this range and then finally when it broke through that range, it came back down to test it and kept on going higher. Except here it broke through and you know so on and so forth. [snorts] Anyway, uh I'll touch up on this a little bit now and then I'll come back later on. So with broader informations, they can tell us where price wants to go and where it wants to head next. For example, once we rejected off this level and reverse down, where's the next area that price wants to go? Price wants to come down and retest these uh these levels down here, which it did. Came back down. Cool. It hit that level. We printed an

12:23 actionable signal, a hammer. could have taken that 22 up, a 22 reversal to the upside and then taken it back to the BF level back there or up there as your max target. Of course, you have your targets here with the previous candle highs. And again, once price came down here, you had other actionable signals that you could have taken to the upside. And again, where does price want to go? It wants to retest these levels here, which it did. So, broad informations. Hopefully that makes sense. Again, you know, any questions that may come up for you, make sure to write them down as you

13:09 go through this uh video and then you can ask me in the in the comments below. So, the next portion of the strat would be time continuity. time continuity uh is simply just giving us a a time frame of you know what are the what are the time frames doing what are the time frames telling us so the way I understand it is when you're looking when you're analyzing a chart you always want to see you always want to do top down analysis meaning you want to start from the yearly time frame and then you want to go down um to the time frame that you potentially want to trade So in the yearly for spy right now we can clearly see that we triggered two

13:56 up. So clearly price wants to go even higher. So the yearly is green. We look at the monthly. Same thing. Two up. Green again. Go to the quarterly. Triggered a two up. We were green but looks like we're coming back. So now the candle's red but still triggered a two up. go to the weekly weekly triggered two up but ended red but overall you can see this um what not going too deep into the candles being closed and stuff like that but overall we're bullish looking at all the time frames. So with time continuity, preferably you

14:43 want the trades that you take to be with time continuity. Meaning if the higher time frames are bullish, you would want to be looking for a bullish or long type of setup. If you take a short when most of the time frames are, let's say, green, you run the risk of having a lower probability trade. and vice versa. If most of the time frames are red and you want to go long, you risk um [snorts] you risk um getting caught on a low probability setup. So let's say for example actually before I go into an example um one thing to note generally if I'm swing

15:32 trading I'll look at the all the higher time frames. If I'm day trading I'll really be paying attention to the 4 hour the daily and the weekly. I don't really care too much about the monthly and higher, but if they are in my favor, even better. So, with time continuities aspect being mentioned, let's say for example, um, you know, let's go to the weekly. Clearly, it's just been two up, two up, two up, two up, two up, two up, two up, two up for since when? Since October of last year, we reversed LA uh last October. Literally had been continuations this whole time. We had a slight pullback, a little TTO, which

16:19 stands for triangle day out. Uh that's another Rob term, which I won't go too much. Well, actually, I won't really talk about in this video. I'll probably make another video for it. Um but essentially, we had pretty much just bullish. Now, if you're on the one hour or let's say even the daily, if you're trying to short these reversals, you can clearly see every time they brought it down, they the very next day they brought it up per se. So, we have this reversal here, which it gapped down, continued up, then we had a three down reversal, only it lasted for two days, kept on going up. So, if you went short and you trying to hold it all the way down here, you're going to get

17:04 wrecked because the overall trend is still bullish. In moments like these, if I'm going against a trend, I would want to take my profit relatively quick in the sense of if I'm taking this short on the daily, even though the overall time frames are bullish or the overall trend is bullish, I'm going to still take my profit quick. So for this 32 down setup, it hit the first target the next day. Uh or actually almost did. It was a few cents off, but the third day it hit the target first target here. So that would have been a winning trade. Would have taken my profit, moved my stop to break even or slightly above and then as we can see here the next day, you would have been messed up if

17:50 you did not take profit there. So, let's go. Uh, one thing to note, uh, just to wrap up really quickly, when it comes to, uh, time frames, what time frames do we take these trades on? Generally, if you're starting off new, uh Rob recommended um that you start off if you're going to be day trading on the higher time frames like the 1 hour, even 4 hour, even the daily time frame to take trades off of. Me personally, I prefer taking trades when I'm day trading off the 1 hour, the 4 hour, and the daily time frames when I'm getting into a day trade. I only go to the five

18:37 or 15 minute if I'm looking for a TTO setup, which again I'll speak on in another video. Uh but generally I'm only taking trades off the 1 hour, 4 hour, and daily. I'll say like 90% of the time I'm taking trades off the 4 hour and the daily. The 1 hour will be if I miss the initial, you know, the initial entry or I want to take another setup. If I'm swing trading, I'm going to be looking at the daily, the weekly, and the monthly. You can also look at the yearly if you want, but um generally I just look at the daily, weekly, and the monthly for swings. So, uh that pretty much uh wraps it up

19:25 for today. I hope this gave you gave you an understanding of the strat um and you know makes it make a little more sense. Actually, before I end it, I'm going to show one last thing. When it comes to setups, uh let me bring up the ebook really quickly. When it comes to setups, there's a ton of different setups as we can see here. So, really, you want to um really hone in when you're starting off trading the Strat. Um Rob always recommends, you know, get like two or three setups that you want to practice with until you get a better

20:12 understanding of it and then you can look into the other ones and add it to your arsenal if you know, if that helps, if that helps you. For me, my go-tos are 2-1 setups, 3-1 setups, actionable signal setups. Uh, there are also like a one- one, like a double inside, or even triple inside, which I show you guys an example really quickly. Let's go to Tesla. Also, when you finish drawing your bar informations, your chart will look will look crazy like this. So, something to note, um, if you're using Trading View, it's good, and there's other videos that I've have there about drawing your BFS on Trading View. It's good to organize them so you know which broadening

20:58 informations they are. Some people like to draw their BFS in different colors. For me, that kind of overwhelms me, which is a little ironic me saying it overwhelms me when I have all these things here. But, you know, if you go to the like the lower time frames, it's a little more relaxed. only have two lines here. But anyway, um definitely make sure to label your BFs because when you start getting them all over the place, you want to know which ones they are. So for me on Thinker Swim, I just uh name it. So I have here a daily BF. Uh this one here is a weekly. This one here is another daily. So I kind of keep track of which ones are which since I only have them in in one color. Um, anyway, going back to the backtoback

21:44 inside bars. When there's consecutive inside bars, that means that there's a big move that's getting ready to play out. And if there aren't any moves, you know, if there aren't any triggers, that's okay. Cuz remember, the more inside bars back to back there are, the bigger the move is going to be. As we can see here with Tesla, we had a triple inside bar, once it broke the bottom, they just murdered that thing. That thing dropped uh what triggered at 1985 and then went uh 18683. So that's what

22:29 that's about $12 in one day. And it also had negative news to propel it to give it even more juice to die down. Again, uh that's pretty much it. Last few tips. Take your time with it. A lot of it can be a little confusing at first. Um, if you are in a group or Discord that I know you in or you know me in, or even if you're just watching this and you you're not in any groups that I'm in, um, and you want the ebook that I presented earlier, just let me know, you know, just send me a message or, you know, in the comments below, let me know if you want it and I can send it to you. Hope this was helpful.

23:14 As always, appreciate you guys for watching this. Um, if you aren't a subscriber, greatly, greatly appreciate it if you do subscribe, you know, like like the video, all that other good stuff so other people can see this and get educated. As always, thank you for watching again and enjoy your weekend.