In the fourth episode of the Astronaut Auditorium, we have interviewed LamboAlex a young trader that comes from New Jersey. Alex has started trading during Covid pandemic when the prospects of a job were slim. We are going to go over some of the early days, when he has found his strategy and how does it work.
Discovering Trading in College
I was born and raised in New Jersey. I’m 25 years old, almost 26. I started trading when I was around 19 or 20, back in college. Initially, I was just testing it out. I first got into trading when I saw one of my friends using Robinhood in college. He was just playing around with it, and I got curious. I decided to give it a try myself. As I delved deeper, I spent a lot of time on Reddit, Twitter, and YouTube, taking random trades. Honestly, it was pretty much gambling at that point.
Things took a more serious turn during the COVID-19 pandemic. I had just graduated and was struggling to find a job as a software developer. Since job hunting was tough, I thought I might as well try trading more seriously. It didn’t work out initially, but I did get a job eventually. With some money saved up, I decided to give it another shot, this time focusing on options trading. However, that didn’t go well either.
I discovered futures trading, specifically with NASDAQ 100 futures. This was a game-changer for me because, with futures, I didn’t have to worry as much about the same issues I faced with other types of trading. That’s when things started to click.
It took around six months to understand the basics, and for over a year now, I’ve been making consistent profits. This allowed me to stop working my previous job, invest in AirBnB properties year and a half ago.
Break and retest strategy.
Here, the NASDAQ 100 kept bouncing at a certain level and finally broke out. Instead of taking a long position immediately after the breakout, a higher probability trade would be to wait for a retest, which happened here, and then take a long position around this area.
For stops, if there’s a clear break, such as a candle closing above a resistance line, you should close the trade. Often, you’ll see a wick that retraces right away. However, if it’s a clean candle closure above the resistance line, you’re probably wrong, and it’s best to close the trade.
Wait for Retests
Instead of rushing to take positions immediately after a breakout, wait for the price to retest the broken level. Enter long positions at previous resistance levels now acting as support. Enter short positions at previous support levels now acting as resistance.
Set Entry and Exit Points
- For long positions, enter near the retest of support.
- For short positions, enter near the retest of resistance.
- Take profits incrementally as the trend continues in your favor.
Risk Management
- Set initial stops at 20 points below (for long positions) or above (for short positions) the entry level.
- Take partial profits once the trade is up by 20 points.
- For new traders, move stops to break even when the trade is up by around $100 to prevent losses.
Exit Strategies
- Close the trade if there is a clean candle closure above the resistance (for shorts) or below the support (for longs).
- Watch for wicks that retrace quickly but be cautious of clean closures against your position.
- If the price returns to your break-even point, close the trade to avoid losses.
I think Dave actually took this trade. We lined it up on the 4-hour chart. You saw it come back to the key level, you could take the long position, and then take your trims 20 points higher, leaving the runners. If they return to break even, it closes out; if not, you keep trimming the position as it moves in your favor.
I see a lot of people trading on the 1-minute chart. I’m not a high-frequency scalper, so I don’t use the 1-minute chart much. You need algorithms for that. I stick to the 5-minute, 15-minute, and 1-hour charts.
Questions from the audience
Q: Alex, do you trade key levels?
A: Yes, I trade key levels, such as 1800, but the market is currently too volatile, as evidenced by yesterday’s 500-600 point move. Typically, I avoid pre-market trading, but there was a great long opportunity earlier, especially in areas with significant resistance or support. On the 4-hour and 1-hour charts, key levels like 17,500 show multiple bounces. I strongly advise against trading the news due to its unpredictability, which can lead to significant market swings and potential account blowouts. Instead, wait about 10 minutes post-news to identify highs and lows before trading.
Q: What does your trading plan look like?
A: My trading plan involves looking for specific setups, like the ones I’ve detailed in the link, and taking those trades when they appear. I focus my trading between 10:00 a.m. and 1:00 p.m., a 2-3 hour window that has shown the highest profitability for me. I meticulously journal every trade, noting the entry, exit, profit or loss, and the rationale behind the trade. I document whether the trade was based on a particular strategy, chart patterns, volume, the stop level, whether it hit my stop, and if I added to the position. Operating in Eastern Standard Time (EST), I stay disciplined in following this routine from my base in New Jersey.
Q: How many accounts have you blown?
A: Quite a few, especially when I was starting out. I worked for my dad, who paid me very little, so I would put each paycheck into trading and often blow the account. Over time, I learned to manage my risk better.
Q: What DMAs (Daily Moving Averages) do you use?
A: I use the 9 and 21 DMAs. They are useful on higher timeframes. Sometimes I also use the 200 DMA. For example, on a clear trend day like yesterday, the market just kept going up, and these moving averages can help confirm the trend.
Q: Could you share how you use these DMAs?
A: Sure, I can give a brief preview using TradingView. Although I don’t rely heavily on them, they can be helpful to identify the trend. Here’s a look at a recent clear trend day where the market kept going up:
- Open TradingView.
- Add the 9 and 21 DMAs to your chart.
- Observe how the price interacts with these moving averages on higher timeframes.
By doing this, you can see how the DMAs provide support and resistance during trending markets. Let’s say you took that bounce and retest trade here. You went long at this point. I would hold the trade until the trend is invalidated. For example, if you used the 9-period moving average (this blue line), you would hold the trade until it breaks. Once it breaks, like here, you close the trade because the trend is invalidated. The same applies to the 21-period moving average. You can see it held initially, but once it broke, that’s when you close the trade.
Q: What’s the longest trade you ever held?
I don’t know exactly. The longest recent trade I held was probably one where I shorted near the top last week and held it for about two or three days. That trade paid a decent amount, even with the swap fees. However, I don’t usually like holding NASDAQ 100 positions for too long because it can move 300-400 points in a few days. I prefer intraday trading for this index.
Q: Do you agree with Coach’s advice about focusing on one asset?
A: Yes, definitely. It takes a lot of time to master one asset. If you focus on one instrument and learn it well, you’ll understand its movements, where it might fake people out, and where the key levels are. This applies to other markets too, like Forex or even crypto. For example, if you know how Ethereum typically behaves around the $2,000 level, you can take a long position when it bounces there.
Final words
For the beginner traders here, I know you’ve probably heard a lot of the same advice repeatedly. Most of what I’ve learned has come from resources like YouTube, Google, and other traders. The techniques are generally the same; they just might have different names. You don’t need to overcomplicate things. If you find a few good setups and stick with them, you’ll likely do well. For example, focusing on break and retest trades can be very effective. This strategy requires patience, often resulting in taking only one or no trades a day.
Patience is key. I’ve advised the guys in the indices chat channel to concentrate on a few solid setups like break and retest. This approach may involve a lot of waiting, but it significantly improves profitability in the long run. Stay disciplined, be patient, and focus on high-probability setups to enhance your trading success.