Box Trade

*Last Update: Aug 3, 2024

 

The Box Trade is essentially a consolidation zone on a trending day. On a trending day, if we enter into a consolidation zone, it is most likely that we eventually break the consolidation box in the same direction as we entered into it. Thus, trusting the trend is crucial for this trade.

*The stronger the trending day the more likely this trade is to work out, but also the more aggressive you will need to be with your entry (strong trending days tend to V shape bounce/fail vs a weaker trend day which may double bottom/top of the trend side of the box)

Prior To Taking A Trade:

  • Are we trading in the direction of the current 30min structure?
  • Is retail likely on the wrong side of this trade?
  • Is it evident that big money is on one side of this trade? (Does every dip get bought, does every pop get crushed?)

Entry Criteria (the more criteria that is met, the higher the chance of winning and your risk should be adjusted accordingly)

*Entry should always be at the support/resistance of the box in the direction of the current intraday trend & 30min trend

  1. Intraday price action should be trending (stronger the trend day the better)
  2. Above/below VWAP in the direction we are trading?
  3. Above/below the 21 EMA in the direction we are trading?
  4. Higher Low's in the box for longs? Lower High's in the box for shorts?
  5. Is there room for continuation on the HTF charts? Specially the 30MIn

Exit Criteria (This trade can feel sketchy but continuation is likely and usually the strongest move comes after breaking and grinding out of the box)

Winning Trades

  1. Winners need to be held to maximize gains on this type of trade (adding is likely difficult because you are likely adding into breakout/breakdown pullbacks/pops)
  2. Trailing stop is best for this type of trade because if these fail they usually fail quickly, but they can also continue to grind all day
  3. If the trade is working, at some point there will be an extention and it's safest to lock profits into the extention

** STOP on this trade is a close outside of the BOX, unless there is a key level close by that MMs could fake the price to. At that point, STOP is absolutely a close above/below that key level. NO EXCEPTIONS!

Emotions: This trade can be difficult to hold because it feels like it could fail at any moment but trust the trend. You will win more than not if you trust it, and the longer the hold the more likely you will catch the extention of the move

Examples of the Box Trade (See Below)