Full transcript of “How To Master the 2-min Chart”. Click a timestamp to open the video at that moment. Need another video? Use the YouTube transcript generator.
0:00 All right, guys. So, let's get started. All right, let's get started. Now, let's talk about the tools that we need to trade before I delve into the depths of what I want to teach you. We do need some basic tools. And the beautiful thing about this style of market play is that we don't need a great many tools to do what I'm going to teach you to do. One of the tools we need is a simple twominute chart. Now guys, there are a variety of time frames that you can use with the things with the tactics and techniques that I that I teach you. Um, you can use a five-minute chart, you can use an hourly chart, you can use a daily
0:47 chart, you can use a weekly chart, you can even use a one minute chart, even though I don't really recommend that time frame, but it's the twominut chart that I want you to spend the vast majority of your time with, largely because it is the perfect time frame uh in um it's the perfect time frame for training a trader. All right, I like the five minute time frame. I like other time frames as well, but when it comes down to training the trader on specific tactics and techniques, nothing beats the 2-minut chart because it offers the number of opportunities at a frequency that builds experience at a fairly rapid
1:34 rate, but not too fast, but not too slow either. All right. I am looking for traders to be able to find an opportunity every eight minutes of their lives. So, we need a twominut chart. This is the perfect time frame. I make sure that my traders are spending the vast majority of their time looking for the opportunities that I teach them on the two-minute chart. On this two-minute chart, we're going to be able to find an opportunity every single eight minutes of our lives. This is why I love this time frame as well. It's the time frame of short-term oriented trading mastery. What you're looking at is a two-minute chart of Tesla right now. Every
2:20 individual bar represents 2 minutes of trading. Of course, you see a barrage of green bars, which means price moved to the upside over that two-minute period. You see a barrage of red bars, meaning that for that two-minute period, the price sort of moved to the downside. All right. Then the second item we need and this is going to be a review if you're familiar with a lot of my work. This you all know but repetition has a very big value when it comes to teaching trading concepts. All right. So nothing wrong with revisiting some of these basic concepts. But for the benefit of those who are um experiencing me and my teaching for the very first time, these are the basic tools that we need. A two-minute chart. We also need a 20
3:05 period simple moving average overlaid on top of that two-minute chart. All right. I don't consider a two-minute chart a two-minute chart without the 20 period moving average. Now, there are different styles of 20 period moving average. There's simple, there's weighted, there's triangular. In all of my years of trading, 43 years in total so far, I have simply found no evidence that the sexier varieties of moving averages are any more superior than the simple form. So all of my moving averages are simple in nature. What you see here is a simple 20 period moving average on the chart. Now the thing I will mention that's important about the 20 period moving average is that its greatest use is as a
3:52 trend as a trending mechanism as a trending mechanism. So when the 20 period moving average is sloping to the upside at a 45 degree angle which is what you see here in Tesla the 20 period moving average is sloping upward but it's not sloping upward mildly like that. It's sloping upward at this 45ish degree angle. This is the most powerful trending 20 period moving average to the upside. Of course, it applies to the downside as well. If your 20 period moving average is declining in a 45 degree angle like manner, you've got the most powerful trend that can exist in
4:41 the markets. There are trends that are sharper but they are not so sustainable. There are trends that are milder but they peter out. The trends that are perfectly that 45 degree angle like trend they can go on and be the most enduring. All right. So, it's important to understand that we use the 20 period moving average to kind of judge which kind of trend am I dealing with with the stock. Do I have one of those sharp trends that will quickly peter out? Do I have one of those mild trends that will eventually the gas will run out? or do I
5:27 have that 45 degree angle trend that can go on for a very long time? And so by utilizing the 20 period moving average, I can instantly tell you which one of these three trends the stock is in right now. Now, it could be in a no trend with the 20 period moving average flat like that. So you can have a flat 20 period moving average with no trend. You can have a sharp sharp really sharp meteoric 20 period moving average which is likely to which is likely to come crashing back in a short period of time. You can have a weak rising 20 that's about to run out of gas or you can have that 45 degree
6:12 angle 20 per moving average where you're going to get the the the largest number of opportunities and the longest type of trend. The second thing I will tell you that's important about the 20 period moving average is that when it's trending this way, it will have very powerful supportive characteristics. So when you have that 45 degree angle trend, you'll find that when the stock revisits the area of the 20, there will be a prop propensity for the stock to rebound off of that area. Now look at to the left of the chart. when the 20 period moving average was not trending in in the way that we like where you you
6:57 did not get that supportive nature. But here is where you start to get the supportive nature. The 20 period moving average starts to trend and it starts to serve as a very powerful area of support. All right. So once it gets trending, it serves as support. When it's not trending the way we like it to trend, it's supportive characteristics weaken. All right. Now, this is this works on the reverse as well. Now the the third tool we need is the 200 period moving average. Again, it's a simple 200 period moving average. We use the 200 period moving average in
7:44 conjunction with the 20 period moving average in the form of a buddy system. It's almost like a child parent relationship. The 20 period moving average is the shorter term one, the child. The 200 period moving average is the law the the the the bigger more significant one, the parent. All right? And I never want you to look at a chart, whether it's the 2minut or any time frame, without these two moving averages. In fact, a chart for me is not a chart unless it has these two moving averages superimposed on it. Now, there's several things I want to point out about this picture that you're seeing here. I want you to point I want you to look to the left of the chart and
8:29 I want you to realize that the moving averages to the left are relatively flat or wavy. So wavy the 20 period moving average is wavy like that and the 200 period moving average is more flat. All right, that's your that's your state on the left. I want you to note that in the middle of the chart you have the trending portion. This is the non-trending portion. And then you have the trending portion. I want you to notice how the flatness or the winess of the 200 the 20 stops being so and starts to rise and it starts to separate itself away from the 20 period moving average. All right. So we start off from this
9:15 sleepy flat state. Sleepy and flat. Then we go to the 20 period moving average waking up and starting to leave its parent, leave its larger counterpart. All right. In the middle of the chart, I want you to notice that we get the widest state that that all things are apart. Here, they're relatively close. Here, there's relatively wide space between the two. between the 20 period moving average and the 200. So to the left they're relatively close together and flattish in nature. In the middle
10:02 they're the 20 is separating from its parent. I mean um and in the middle in the total middle of the chart you have a wide separation between the two. We're going to come back to this concept because this concept is going to form the crux of our consistency in terms of picking the right plays. Understanding these three states. Let me put them again. Narrow trending and wide. Understanding these three is required to to be good at consistently finding
10:50 the right thing. You always need to be able to determine which one of these three am I dealing with? Am I dealing with this flattish narrow? Am I dealing with the trending part? Am I dealing with the wide part? And you are to take every single thing you look at and make sure you can identify which of the three are we in. Now, of course, everything is applicable in reverse as well. All right, we're going to get to this. This is going to deepen as we go forward. So, I want to paint for you the pictures of power, a bull picture of power and a bare picture of power using these two moving averages. So we have the 20 the
11:37 200 period moving average here. We have sorry about that. We have the 20 period moving average here. Or let's just say we have the 20 period moving average under it first and then the 20 period moving average starts to leave the 200 period moving average. This picture that you see right here where you started flattish and then went to a trending nature where the 20 is separating itself from its parent 200. This is called the bull picture of power.
12:25 Okay. Now your stock of course is above them all. That is the picture of power. It is rising stock over a rising 20 period moving average over a flattish 200 period moving average. I'm going to repeat that. Your bullish picture of power is a rising stock above a rising 20 period moving average. Both of which are rising above a flattish. doesn't have to be exactly flat, but a flattish type 200 period moving average. That's your bull picture of power. Your bare picture of power is just the opposite,
13:10 right? You have a flattish 200. Your 20 might start here and your 20 starts to separate itself from the the flattish 200. And we go from a relatively flat state to a trending state where your 20 is se being separated and your stock is underneath falling. All right. So in this case you have your stock is under a declining 20 period moving average. Your stock is under a declining 20 period moving average. Your declining 20 period moving
13:58 average is under a flattish 200 period moving average. And this is the bare this is the bare picture of power. All right, let's take a look at some examples of these pictures of power. Again, Tesla is demonstrating the bull picture of power. Right, look to the left. You kind of start flattish and then your 20 starts to separate from the parent. That is your again Tesla is demonstrating the bull picture of power. Right? Look to the
14:46 left. You kind of start flattish and then your twin starts to separate from the parent. That is your bull picture of power. When you have a bull picture of power, the modus operandi is to when you have a bull picture of power, the modus operandi is to buy all strength and all color changes near the 20 period moving average. So look at strength bars, fat green bars. That's strength bars. Power bars that originate near the 20
15:33 period moving average. Look at this. The power bar originates near. It doesn't have to touch it. It just has to originate near it. Okay. Power bar originates near. Power green bar originates near the rising 20 period moving average. That's the first thing. When you have got the bull picture of power, power bars that originate near the 20 period moving average are buys. Okay. When what are also buys? All color changes that occur near the 20 period moving average. What's a color change? Let me show you very quickly. A color change is when you have a red bar
16:20 that is taken out by a green bar. Boom. So, this is what I call a color change. You change from red to green. And your buy is right above the red. Boom. You buy into that bar as soon as it bypasses the red. But it must be near this event must be near the 20. You don't want it out here away from the 20. You want it near the 20. So if we look at color changes, here's red and boom, we get both. We get power bar
17:07 and color change. That's double strength. power bar originating off the 20 and a color change near the 20. We don't want this color change even though it worked because it didn't it didn't originate near my 20 period moving average. So, we missed that one. That's okay. Miss money is better than lost money right? But this one is a color change. Boom. This one is a color change near the 20. Boom. Green takes out red near the 20. Go. Green takes out red near the 20. Go. All right. So, you got this, right?
17:53 Picture of power. 20 is separating from a flattish type 200 period moving average. 20 starting to rise. Power bars off the 20. Boom. All right. Red bar near the 20, green bar takes it out. Boom. And these are our two main events. All right. Now, I will tell you this. If traders dedicated themselves to only buying a stock that was demonstrating the picture of power at or near the 20 period moving average, I am telling you their accuracy would go through the freaking roof. Do you understand? This ensures that you're playing with
18:39 the flow, with the power, with the institutions. You and I can't create a power trend. You and I can't create a picture of power. A picture of power is developing here in Tesla because institutions are starting to accumulate the stock. That's the only way a picture of power can start to form. The only way the 20 period moving average can start separating away from the 20 period moving average is that buying is starting to overwhelm the selling. And all we're all our job as traders is is to jump on the coattails of institutional buying. But you've got to be able to to take the pulse of the market and be able to identify at what point are institutions starting to pick up their buy activity when that 20
19:26 period moving average starts to separate from the 200. You and I can't do that. That's institutional pick up and buying. And now all pullbacks to the 20 period moving average are buyable. Power surges off the 20 period moving average buyable. color changes off the 20 period moving average. Buiable.
