The first thing that is the most important when trading large caps is to first identify where the largest amount of money is at. There are 3 different trend that give information on where this money is at.
1. Macro Trend
2. Micro Trend
3. Daily Trend
1. Macro trend is basically where the market is at on the weekly chart. Since we are downtrend on the weekly we are in a Macro Downtrend.
2. The Micro Trend is whatever we have been doing for the past week. For example:
1. Macro downtrend on the weekly
2. Micro uptrend exists when we break the downward momentum and start creating higher lows on the daily chart.
IMPORTANT: When we are in a micro uptrend stuck within a macro downtrend it is much easier to go long than it is to short. Similar to if we are in a macro downtrend and a micro downtrend, then shorting is at its best. When you have confluence of 2 factors being micro and macro downtrend then shorting should be sized into very heavily. 8x normal size is best but at least 4x normal size works fine. You must use bigger size when you have the confluence of macro and micro because if you dont then all of the paper cuts you take trading a micro uptrend in a macro downtrend will not be worth it. When the flow of money is so strong you must take advantage of it by using bigger size.
Within these 2 trend there is also a Daily trend. The daily trend exists within a macro and micro trend and usually is the hardest to figure out since trends usually do not occur until at least 10:30am.
- In this example we are in a macro downtrend and a micro uptrend. The daily is also in an uptrend so therefore we have a Macro down, Micro up, and Daily up. This will give very high percentage chance of winning if you decide to go long. The best confluence of factors is macro + micro being in the same direction in terms of trend, but if the micro trend is up and the daily trend is up then it will be much harder to short into these moves.
-In this example we are in a macro down, micro up, and daily downtrend. You do not know what the trend is on the daily until you see the 8 and 20 ema crossover and hold below vwap. In this scenario it will be hard to trade regardless of trend but it will be much easier to short than go long even though we are in a micro uptrend on the daily. The reason why its easier to short while being in a micro uptrend is because we are still stuck in the macro downtrend so when there is downward momentum on the daily (even while in a micro uptrend) we still have strong selling when the selling occurs.
-This is the moment where you have the test of the micro uptrend turning into a micro downtrend. Remember the market is still in a macro downtrend so when we see big moments where the micro uptrend is failing, we can safely assume that more sellers will pile into the market at a very heavy pace so taht the macro downtrend can continue in their favor. Days following the reversal from uptrend to downtrend usually give almost a 100% win rate if you follow the prevailling daily trend.
-This is the first day following that last example where the micro uptrend broke. As you can see there are very strong sellers just waiting to sell into any pop that happens intraday. THIS is where you should be sizing 8x normal size into any and all bounces that are close to resistance. The win rate is extremely high on days like this simply because when the trend is first broken from micro up to micro down (macro has to be down also) then we get very large moves to the downside and trillions of dollars need liquidated out of the market for swing trading hedge funds. It is very important that these days are identified early and prepared for extensively so that they can be capitalized on.
HOW TO TRADE THESE SETUPS DAILY:
1. IDENTIFY: Macro trend, Micro trend first.
-If macro is down and micro is also down then the only option for trading is to short. There should not be any scenario whatsoever to be looking for long trades unless a massive wyckof is forming at lows or similarily we are just unable to break to new lows and the micro downtrend is constantly hitting the trendline attempting to break it to the upside.
2. AT 10:15 IDENTIFY THE DAILY TREND:
- If the daily trend is the same as the micro and macro trend then we can safely short with a very high win %
- If the daily trend is the opposite of the macro and micro trend then we must be careful going in the direction of the DAILY trend because we simply do not know if this is a trap to pull in more buyers/sellers. It is never safe to go against the macro and micro trend when the daily is the opposite, UNTIL a base is formed or a top is formed. Even then it is much easier to just wait for the second day where we can have a higher % chance of winning since the trend will either be held or broken.
