Textbook Trading – Notes and Review of Chapter 4 – ABCD & Long Trades by @investorslive

Table of contents:

Summary:

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Summary:

This chapter focuses on the most classic IU type play, the ABCD setup. While it has been a goal of mine for quite some time to improve my going long skills, it has been made extra apparent this summer that I need to expand my repertoire.

intro

Because of that, this chapter and the next chapter on buy setups had me looking forward the most to reviewing this DVD. The ABCD setup is so simple that at times it can be a little confusing. Yeah I know that statement is confusing “so simple its confusing” what the fuck are you talking about?? But its real easy to do those air hand motions of a chart and say A is here, B is here and so on, but never really grasp it. Nate does a great job breaking it down with his own illustrations. Which I think is really valuable, you can look at lots of real examples and never really get it. Once I saw his drawing it clicked a lot more.

ABCD

Perhaps this best and most useful part of this chapter though is the introduction of THE PLAN concept.

If there was one biggest reason for failure in trading I would have to say its trading without a REAL plan. Its easy to say, “I’ll buy here and sell here if like some stuff happens”. But the most valuable lesson from the IU community is have a REAL plan with educated risk to reward. The ABCD setup gives you that. You follow that as your plan and it gives you a defined profit exit and defined loss exit. VERY useful for the beginner or growing trader.

I really enjoyed this chapter and feel like I became a better trader for watching it again. There are tons and tons of examples that really drive it home. I hope to start screening for and executing more buys. But that being said I felt my short game improve. I can’t tell you in hindsight how many times I’ve been short an ABCD setup. And instead of covering at C for a small reasonable loss. I wait for D and cover into a fucking squeeze. If I could get back the losses I’ve suffered between the C and D point on a gearing/perking setup, holy shit who know’s where I’d be today! So whether or not I buy more, I feel I will recognize these setups when I am short and exit before a big move.

summary

Notes:

Introduction of the plan idea (Core IU principal)

Gearing/Perking/ABCD setup
-Helps find risk to reward
-A – Morning spike
-B – Pullback/bounce
-C – Higher low-risk on B
-D – Breakout – new HOD
Easy to set risk on B, takes emotion and guessing out.

Lots of examples – again bummer DAS charts are very dark, but you can zoom and see them

Look for increasing volume on C, this is confirmation of interest in higher lows.

I really like the diagram that isn’t an actual chart, hand drawn, it makes it much clearer.

Magnets – combine them with ABCD, points for explosive moves.

Most useful IMHO is that you can use these setups during the lull, set targets and not have to stare at screens all day.

Good for planning gappers.

MFT – attract more interest aline this with breakouts and ABCD and magnets

Line up intraday on daily

Big lesson here, watch these ABCD setups on shorts as well. SO many times I’ve let myself get squeezed out of shorts when I should have covered into grinding/perking.

Good for pre market scanning, line up daily chart with intraday.

Great for setting risk.

Definition of gap fill

Review “tightening” action coiled spring

Best lesson, the idea of having a plan with an educated set risk/reward

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