Episode 6 - How I generate profits in my own trading - A deep dive

Episode 6 - How I generate profits in my own trading - A deep dive

Introducing episode six as a deep dive into how I trade, recommending viewers watch on YouTube due to chart markups. I explain using black-on-white candlestick charts to reduce emotional reactions, then detail my core principles: an ASFX “Automatic VWAPs and Key Levels” tool with three VWAPs (yesterday’s NY session, 6:00 PM EST changeover/overnight, and the current NY session anchored at 9:30), plus a 15-minute NY opening range. I describe a VWAP hierarchy led by the current NY session VWAP, using alignment across VWAPs to bias long or short, and preferring entries near VWAP as fair value with confirmation rather than chasing moves. I discuss “handoff” VWAP and low/high-of-day VWAP as lower-probability tools, adds volume profile levels for confluence, and outlines discretionary trade management, including stop placement using multiple resistance levels, scaling out in drawdown, adding to winners, and trailing stops.

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Transcript

SPEAKER_00 0:11

Before we get started, I want to just say that anything you hear me or any of the guests on this podcast say is to be considered for educational and entertainment purposes only. I am not a financial advisor. You should do your own research before taking financial decisions. And with that, please enjoy the podcast. All right, welcome to the podcast. This is episode six, and this is about a deep dive into how I trade myself, uh, the indicators that I use, the structure that I use, the information that I use to inform my trading. Now, if you want to know a little bit about the uh the indicators as well, also indicators in general, uh, you should go back to episode three, where I really focus on indicators more generally, and also some of the other information that is used typically in my trading. Uh, but this is a deep dive. So, what I'd also recommend is that you head over to YouTube if you're not already there, over to the Trader Dane channel on YouTube, because this episode really is full of charts, full of markups. So you want to see the video recording as well. I'm going to try to be as informative as I can for you as a listener. Uh, so you should be able to follow if you're just listening in on Apple Podcasts or on Spotify, but you really get the most benefit from also watching the video. So just caveating that up front. There's a couple of assumptions that I'm going to make. One is that you are familiar with candlestick charts, price charts, uh, these classic Japanese candlesticks. And what you're gonna see me doing is I have these charts marked up in black and white. That means the canvas, the background is white, and all the candles are black. I do this because the classic red-green candlesticks, where a red is one that closes lower than it opens, and a green one uh vice versa, it opens lower than it closes, and with wicks and all that, that has had a mental or a psychological effect on me. Uh, particularly if I'm in a trade, being a new trader, you see a red candle develop, uh, maybe a strong red candle, and you're in a long position. That can prompt you psychologically to want to exit the trade. I take a bit of the top off of that psychological impact by having all the candles shown in black. Um, so it becomes less emotional for me. Uh, and that's worked uh very well. So you will see that the candlestick charts for me are black candles on a white canvas. They are the standard open, high, low, close uh candlesticks, besides from the uh from the colory. Then there will be a number of mandatory uh indicators that I use to begin with. There are three key uh indicators. I'm actually using a batch of indicators made up as one uh by ASFX. I think it's called the um, you can see that here on the screen, it's called the ASFX automatic VWAPs and key levels. So that includes three VWAPs. Yesterday's New York session VWAP, because it carries information with lots of volume from the day before. Then it includes the changeover of day VWAP. So that is the 6 p.m. Eastern Standard Time VWAP that carries the information from the overnight session, Asia and London, uh, and then goes into New York for the current day as well. And then finally, the New York session VWAP from today, from the current session, uh that is anchored at the 9.30 opening and then runs throughout the session on the given day. So those three VWAPs are really the key indicators that I use, and I'll show you a little bit about how I use them as we dive into it. In addition to that, uh the ASFX VWAPs and key levels indicator includes an opening range um indicator. So the opening range is set as the first 15-minute range uh of the New York session. So from 9.30 to 9.45 Eastern Standard Time, there will be a horizontal line at the top of that range and a horizontal line at the bottom of that range. You will see that in the indicator as well. I'll just flick them on here on the screen so you can see them. Now notice the the opening range, as I said, those are the black horizontal lines here and here. So they envelop or encompass the range of the first 15 minutes of the session. You can see the bottom going down here and the top coming up here. The dotted black line is the changeover of days. So the 6 p.m. previous day anchored VWAP. And the light blue line, the teal line there, is yesterday's New York session view up that carries some more volume and time information because it's anchored at the 9:30 of the day before. For Mondays, that would be the Friday. Um, and then the blue line here, which is uh the most essential one, the current New York session VWAP. And I'm just showing you the day here from um from Friday. Today's Sunday. So this is just the latest day we have on the uh on the chart. So as you can see, there's I mean, there's lots of information on how to use VWAPs. You can also check out Austin Silver's uh Futures 101 and Futures 2.0. Not gonna advertise anything particular here uh besides that because that's helped me a lot. And it just goes into the theory of why VWAP works. You also have Brian Shannon's book, uh Anchored VWAP. And there's also people like Chris Drysdale who publish a lot of information, both in terms of books, but also online, uh coursework and so on, where you can dive into why price interacts with the VWAP or how the VWAP is structured uh with price time and volume information uh to give you a good indicator to trade off of. So, what I use it for is I will have a hierarchy where the the New York, the current New York session VWAP is the most important one. Uh so I will let that guide me first and foremost. And I use the overnight, which I call it that the changeover of day VWAP, the overnight VWAP, and the previous day's New York VWAP, I will use them as additional information. I'd like to be on the same side of all these VWAPs. So if all the VWAPs are sitting above current price, then I will be looking for shorts. That means I will be looking to sell short into the market, betting on price going down. Conversely, if all the VWAPs are sitting below price, it's pretty much like the standard uh moving average. If these key indicators are sitting below and they're all sitting below, then buyers are in control and you are looking for long positions buying into the market, betting on price going up, because that is the higher probability trade based on the information that you have from the indicators. Now there will be a lot of times where these are a bit conflicting, especially lately, actually, last couple of weeks, we've had a lot of sessions where price will be on one side of the New York VWAP set uh the session VWAP, but like it might be above that coming out of the open. Buyers are taking control from New York Open. But because we're in an overall downtrend, the VWAPs that are anchored to previous time points, uh like the overnight and the previous day's VWAP, they will be coming down from above. So you get this pinch where uh price is sitting in between. And it makes for a little bit of a difficult trading environment if you're trading VWAPs. But then again, what I've had success with is, and this is just for your inspiration, I'm not saying you should you should do this every time. Uh you should use your own discretion, your own experience. Um, I'm just trying to inspire you. But but what I have seen a lot of times is that if you have this rank of the VWAPs where the New York session VWAP is the most important one, then you shouldn't you should be able to trade quite consistently, even if the other two VWAPs are are a little bit conflicting in terms of the information you're seeing. So if buyers are in control relative to the New York session VWAP, that means buyers are in control from 9.30 to whenever the time is that you're you're about to enter a trade, then buying is the um is the more probable trade. But of course, you always have to keep in mind that everything is not aligned, you don't have full confluence, so there is a little bit of of probability or a little bit of risk, extra risk that the trade will not work out in your face. Now you don't want to just blindly uh go long because price is above. VWAPs can also act as a magnet pulling price back down. You will see that also in a lot of courses, both uh written but also online. And we are typically looking, so so VWAP is this representation of a fair price, and institutions use it as well. So, what you want to do is let's say on ES, current price is 15 points above the VWAP because it's shut up, it's ripped, buyers are really taking charge. Uh, you don't want to enter at that point, uh, at least not necessarily, uh, it especially if you're new. What you want to do is you want to wait until price comes back down to the VWAP because the VWAP, as I said, is a representation of a fair uh price, a fair value for that asset at that current time with the volume information that is also incorporated in the VWAP. Yes, buyers are in control because we are above the New York session VWAP, but sellers are just, or there's some profit taking that is allowing price to go back down to the VWAP. And then once you're at the VWAP, then you're at that fair price. So then you wanna you wanna look for an entry. You want to make sure that, of course, you want confirmation that it's not just gonna rip down through and sellers are taking charge. But if you see a good interaction, uh some confirmation that that buyers are stepping back in and prices coming back above the VWAP, then you have a high probability setup and you are more likely or it's it's a high probability win if you go long in that situation, to put it uh short. Does that mean it works every time? Absolutely not. But we've VWAP traders will tell you that this is something that works more times than it doesn't, and and therefore it's a consistent kind of strategy, consistent setup, and you really want to keep it simple. You don't want to pollute it, so to speak, with too much additional information because it's just gonna make you hesitate. And sometimes hesitation is really uh killing a good setup. So make sure you do that. And as you can see on on Friday here on the chart, you we had sellers stepping into control uh pretty early on in the session after the um the opening range had set. Um we broke back below. Uh let me just draw it out here. We broke back below the um the New York VWAP, the blue line, after a brief excursion above it, and then price simply dumps, right? So there's nothing holding sellers back here. It briefly retests the opening range low and dumps further. Um and then you see it ranging after that, ranging in a fairly tight range, but also respecting the VWAP uh as we come along later into the session. You'll see it. The VWAP is not a specific price, it's it's never just it's gonna react right there. It might sometimes, but you're better off viewing it like a zone, and that's also where your trade management, your stop loss and so on comes into play because you never want to keep it too tight. Uh, because we are really talking about a zone and not a specific price level uh when we're talking VWAP. Um but as you can see, it actually after a bit of ranging here beneath the New York VWAP and beneath the other VWAPs as well. Uh, you see it bouncing pretty nicely off the uh the New York session VWAP. And as we come over here, that's uh around 1 p.m. So back into the PM sessions, sellers really start to take control again, and we see it dumping further down uh in the PM session. You can see it goes all the way down here before eventually, just before uh the close of the session, uh there's a bit of a rebound up here. I think that was also news-driven, uh if I'm remembering correctly. But this is a pretty nice example, and this is just the latest day uh of trading, uh, the latest session we have. Uh pretty nice example of how the um the VWAP actually functions to guide you in your trading decisions. Um, if I just erase some of the uh the markings that I just did here, I want to show you something uh else that is also relevant for a day like this. When we see that massive dump out of the um out of the open right after the uh the opening range has set. So this is roughly 20 minutes into the sesh. What you can do, and I want to mention this, this is a lower probability setup because it gives you a price that is offset from the actual fair price, which is the New York rewap. It's called the handoff. It's something that you can also learn online or in futures 101, futures 2.0 by SFX. You put an anchored rewap on the last touch of price with the New York rewap that gives you information from that point onwards on time, volume, and price. So if I put that on here, on the candle that the last candle that touches the New York in this session, uh let me just mark it off in a different color. Put it on a pink here. You can actually see when we're in a trending move like that and price really dumps and sellers are in control, the handoff VWAP actually functions as a really good level to trade off. So that becomes the new trend's fair price, you could say. What you want to be careful with is that this never really lasts, right? Uh indefinitely, or even often it doesn't last to the end of the session. So at some point, if you're selling off, buyers will start to step back in and then it validates your handoff. And that also goes back to the point about it being a less favorable or less probable uh entry point. But a lot of times in trending moves, it can actually work quite nicely, especially in these cases, like on the one-minute time frame where you see you actually have a couple of candles on the one minute to just assess as a trader when you're sitting there watching it play out in real time, to just assess are we gonna reject the handoff here or are we gonna push back up through it up to the New York? And as you can see in this case, you actually have a couple of minutes of chance to assess whether it's going to reject and dump further or whether it's gonna cut through. I, for one part, for my sake, I would I would actually probably at least take the second one here because you also have some confluence with the blue line, which is yesterday's or the day before. So Thursday's uh low, um, which is also often a good level to uh to trade off of. Then after that, we come back down further down and we go into this ranging situation, like I mentioned before, where there's not really much to do, not really much to um to trade off of in terms of key levels, and you're far away from the New York rewap, which means you're far away from that fair price that you really want to see, regardless of whether you're buying or selling. That's really the price that you're looking to enter. I usually tell myself, if if you were selling a car and you know the fair price of that, you don't want to sell it too cheap and no one wants to buy it too expensive, right? So you you want to wait until someone comes along that has that bids the right price or asks the right price, um, which is pretty much by definition the New York session rewap. So that's the level you want trade-off of. One challenge that I've had a lot and that I I know other uh traders with rewap also has is it's difficult when if price rips out of the open uh in in either direction, it's very difficult to remain patient and sit there and wait for price to come back to the New York. What I tell myself in these situations is that it will come back to the New York VWAP because this is the like they said, the fair price. This is also a level that institutions trade off. So it's extremely rare that you will see price just take off or dump and never come back to that fair price level, the New York session VWAP. So that's a bit of information on that and how to use it to trade off of at least how I use it. Remember, I'm not telling you how to trade or what to trade, or um I'm not teaching you anything. I'm just here to inspire you uh by telling you what I there are there's a one extra um VWAP that I want to show you, um, which can also be plotted here on Friday's session with some relevance, I would say. Um that is the low of day or the high of day VWAP. So in this situation where we're in a massive sell-off, like on Friday, let's say we come up here to the uh the nine call the 1015, sorry, uh we're 45 minutes into the session. I anchor a VWAP here. And what I want to watch for, uh, so again, we're far away from the New York uh session VWAP, so you're not looking at the fair price, but if we're in a strong trending move, this can be an additional piece of information that you can use. Uh often you would use it to scalp, like take really small moves because uh you never know if price is just gonna move further in the uh direction of the trend, but it can. Uh and sometimes you will also see it, see price go back up towards the New York VWAP and then come back down and break the low of day VWAP. And once it breaks that VWAP, like it does here, you can see that it does actually break it here and close below. Then you can actually put in a trade here. Let me show you a short trade like this, and you could trade into the session lows. It's not a big move in this case, it can be bigger than this one, but it's it's a fairly high probability setup, especially when you have so much confirmation that sellers are in charge. Uh, you want to set a fairly uh conservative stop loss in this case because you you don't know if it's gonna uh um range uh a little bit up before it comes down, even if it has broken the law of day. I want to caution here. I've I've actually gotten burned quite a bit trying to trade these uh because psychologically, what it really is, like I said before, it's not you're not trading at the fair value. So it's it's a less than uh optimal entry point. So you want to be really careful that you're not in these situations chasing an entry. So it you can be impatient, God knows I am sometimes, which means you don't really want to wait for it to come back to that good level. And it's one of sort of the cardinal sins, uh at least for a beginner trader, that that you you just want to take an entry, right? You you feel like you've been sitting here for an hour, nothing has been presented, uh, and now it breaks the low of day VWAP. So now you're gonna go in because you might as well, or whatever reason, your your mind is gonna come up with. But you just have to remember that you're not trading or you're not entering at the best fair price uh of that session, so buyers could still want to buy it back up to the New York VWAP. So you definitely don't want to put your stop beneath the New York VWAP uh in this case. And to be honest, when you do trade into the break of the low of the AVWAP or the high of the AVWAP, which is the same situation, just uh in reverse, then often what you'll see is if you mark it up first with the position tool in TradingView, for example, you will see that what is required of you is quite a wide stop placement. So you will have a lot of risk on that trade for a uh comparatively small reward because you you want to be trading into supervious structure, which is often not that far down. So you might be sitting with a potential setup that has a uh less than 0.5 risk to reward or reward to risk, sorry. Um and you just want to consider that. I know a lot of traders will say risk reward doesn't really matter much, and I agree to that, but there's also a threshold where you it's just simply not worth it. You might as well just wait for it to come back because as you can also see from Friday's session, it does come back, it comes back multiple times to the New York session, meanwhile, and then it dumps again. So the way the futures markets and the price action on ES, for example, behaves actually often sets you up quite nicely for these scalp moves where you take a leg down from the New York or up if you buy, uh, and then it comes back, and then you take the same leg down really uh as you did before, just a second time. So, so so you can really scalp these similar moves off the New York VWAP. So, in general, the handoff VWAPs and the low of day, high of day VWAPs, I want to caution using them, and I've moved away from doing it uh very often. I I very rarely do it because I'm I know it's gonna come back. From my experience, you know it's going to come back, it's going to um retrace back to the New York VWAP, and there is your fair price, there is your best possible entry. And then one thing you want to also know uh note is that once it is at the New York VWAP, you want to wait for a bit of confirmation to see which way price is going. If it just rips through or bounces in less than a minute, then that trade is probably not for you. At least that's the psychology or the mindset that I apply to it is if it bounces in less than a minute or wicks down and uh jumps up again uh in a long in a long setting or in a buyer control setting, then that trade wasn't for me because I want to see some good confirmation that uh either buyers or sellers being in control. And if it rips through, then obviously I wasn't right in in considering a bounce play. So it's better for me to just stay out of that entirely and wait for another confirmation of either buyers or sellers being in control. So you don't want to just trade into the first touch of the New York VWAP. Uh, you want to see some confirmation that uh buyers or sellers are stepping into control. Now, if you um so that was a bit about rewaps. If you listen to episode three, you will also hear me mention something about volume profile, previous days, value area high and low, and previous days of control. I have that marked up here on the chart as well. Value area high from the day before is the yellow dotted line, point of control is green, value area low is blue. That's a further piece of information confirming to me that since on Friday we were sitting below all of these key levels, sellers really were in control in comparison to the day before. So I am generally looking for shorts and the VWAP. We're telling me the same thing. So if I took a long on Friday, I can actually remember now if I did. But if I did that, that was a low probability trade. And it was um it was probably actually a psychological mistake if I did so, because I really wanted to be healing short, also with the higher time frame downtrend that we're in since I don't know the most of 2026, or at least since the all-time highs were hit in late January. Now the last thing I want to touch upon is uh um the trade management, the stop uh loss and the profit target placement. So let's say just as an example that we actually did take the uh the trade from the bounce of the uh the handoff VWAP just as an example before. We would say we we saw the rejection of the handoff here. I would enter in here. Uh that's at 10.08 in the morning. What I would like to do here is I I also I always want to be mindful that my stop placement includes for a short position, my stop should include some some reject or some resistances inside of it, right? So you you have some um some modes or some uh levels of resistance where price will also reject and come back down. That leaves you with more uh certainty that sellers have chances to step into control, even if the first line of defense, which in this case is the handoff VWAP, breaks, then you are more covered than just that first line of defense. So in this case, I could go in and say, okay, if I put it up here, I have not only the handoff VWAP as the line of defense, I have the New York session VWAP, I have the opening range low, and I have previous days value area low as a lines of defense where sellers can step in, defend those areas, and bring price back down into my position. I don't want to make it wider than this because you you could also say, well, let's put it up here at um above the entire uh range of the day, basically above the overnight and the previous day's uh VWAPs. Uh but then you're looking at, then you would probably um if you do this too often and you lose some of these trades, which will happen, then you're losing 36 points to a potential profit of I don't know, uh 10 to 15 points, something like that, which is not attractive anymore in that case. So in in this case, I and that's that is discretionary, it's something that you build with experience. I would put my stop here. Also, it has the information from the previous top here or the previous bounce up here, and we're putting our stop above that as well. So half an hour earlier, price could not push back above this level. So it gives me further um uh confidence that that this stop placement is good. So that's 17 points. So then you want to make sure that you position size correctly. I I typically to trade three to five micros uh with three micros on, that's something like$250 of uh of risk on ES, MES, I have to say. So that these are micro contracts. Now, one of the difficulties of trading the handoff is I have some structure to the left here that bottoms out at 6600, which is also kind of a key psychological level. So would I want to do this um and have a trade looking like this? I could. I certainly could because I also saw the the clean rejection off of the uh the handoff. What I'd probably do in this situation is I would um take some, at least traditionally, I would take some off of my position here. If I was in with three micros, I would take two of them off and leave them with profit. So take the profits there and let the last one run uh a bit further, trailing my stock. Now, what I have done uh recently is with some success, I would say, is actually to add into my winners instead. And that's kind of the theory behind um winning trading, where you you want to add to your winners and you want to cut your losers quick. What's really helped me in the last month or so, increasing my average win to average loss and increasing my profit factor is exactly that actually. So in this case, if I was trading this and I saw the the strong move down here in this candle here at 10, 11 a.m., I would actually probably come out of this. Um I wouldn't have a uh profit target here, I would set it somewhere down here just arbitrarily. Uh and then at this point, as this candle closes and breaks the low of day, I would probably add another micro into my three micro position, and then I would start trailing my stock gently. So based on the candle structure, maybe down to here. So I'm still uh above the uh the recent uh high. And then as I saw price starts to starting to range here, uh ranging uh around the uh the low of day Miwap, I would probably pull the position there. One thing you could also do is leave your stop at break-even, but we're also talking base hits, we're talking futures prop trading. So I don't want to push things too much because we know that there's a lot of whipsawing in the APCs. So so at some point you also want to take profits. Um but I really like the idea of cutting losers quickly and also trailing the stop at least to some point, because then you're always gonna take small losers, uh, and then sometimes you're gonna take a nice big winner. One additional last point to make to this is if price had come up here against me and moved up this way, as we would touch the New York remark, that's a key level to me. Uh, it's halfway into my drawdown. I would scale out of the position. So I would probably take two of the three micros off. And then uh I would be so I would be taking that loss that's pretty much at eight points with two micros. So that's$80. I would take that loss, and if it kept moving against me, I would only take a loss on the additional eight points uh with one micro, which is half of that. Um so that really cuts my my one hour risk into a fraction of a one hour risk, 0.6, 0.7, whatever it is. But if it moves with me and I'm in profit and I scale into it, that effectively moves my one hour profit or 0.5 ho profit up. Um so I'm maximizing my winners this way and I am minimizing my losers. And that's worked well for me. Doesn't necessarily work well for everybody. It's just that's a personality tweak that I've made to my VWAP trading, I would say. One final thing to note about this is if it comes back down, if I've scaled out, partial scale out of drawdown, and price actually starts going in my direction again, comes back into profit, then I will scale back into it because my idea is um is confirmed this way, and I will have the full position on again, which also makes for it will pretty if it does move in my direction, it will pretty quickly remove the small loss that I took from taking off the two micros in drawdown. In this situation where head in again, when it's back in profit, I will also trail the stop to minimize risk. As you can hear, there is a lot of discretionary uh trade management uh discipline to apply, and that's something that comes with experience. So if you're new, you want to really just use these few indicators and make sure you uh are consistently trading off of them, being patient, waiting for confirmation, and then trading off of them. If price rips uh and or you hesitate, then you do not enter because then you're already too late and the price is optimal. This was a bit of a long episode. I hope you could uh follow along. And also if I hope you're watching on YouTube because I've done a lot of markups and my screen is looking like a mess. If you're just listening to this, you should have a look because uh it is a bit messy. Um, and I'm not sure you uh you will follow all of it if you're just listening in. But I hope you enjoyed it. And as always, remember, I am not providing financial advice or recommendations. I'm only here to inspire you and to entertain you. See you next time.