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You CAN Time the Stock Market - Here's How

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A market cycle system. It's very simple.

It's a system for defining uptrends and

downtrends relevant to your time frame

and how you trade those different

phases. So, how do you trade early in an

uptrend? How do you trade later in an

uptrend? How do you trade an early

downtrend? This system kind of defines

all of that for you and gives you a lot

of clarity. Everybody's chasing

performance. Everybody's chasing, you

know, the hot stock, the hot tip. But if

you're acting on emotions, you're

acting, you know, when the trend is

already well underway. And we want to be

participating early in the uptrend as as

you know, the reward is worth the risk.

and then exiting when that dynamic

shifts as well. That's essentially what

a stress test is. It's the most

important day during uptrends that gives

you information as to how the leaders in

the market are acting. Uh trading late

in a downtrend. Downtrends are typically

shorter in duration than uptrends. Uh

you want to sell short positions into

strength, cover to weakness, monitor for

relative strength. Like we said, build

RS lists. Look for themes that are

setting up together. As Ross says, look

for overall groups that are building

launchpad setups together and moving up

the rightand side of the bases. Look for

stocks leading the market cycle and

watch for potential uptrends and

upcycles and watch for developing

leaders. That's the the key thing.

Identifying the leadership and judging

how they are acting will give you a huge

tell again to what Ryme mentioned about

the risk appetite and risk profile of

the market currently. And watching the

leaders will give you that evidence

beforehand. Just this recent correction.

This is the QQQ on the bottom. Here is

PLTR in the middle and then Reddit at

the top. And Reddit and PLTR were really

the strongest growth names, growth

leaders. these broke gap down to the 21

EMA resolve lower gap uh not gap down

but strong reversal down breaking many

lows at all before the QQQ really

started breaking down. So watching these

leaders will give you that tell a few

days before the market really reacts

significantly. So that's why it's so

important to watch them very very

carefully. Here's our RS example. This

is PLTR. Note how it entered an RS phase

on this day right here and then it set

up in a gap and I actually tried it this

day and the next day and got stopped out

but it re-entered on the 21 EMA

pullback. So again, you're going to get

stopped out but then you want to benefit

from when it sets up again and breaks

through the pivots again. And throughout

this it held well above the 200 day

moving average when the market was well

below it. Big undercut, big moveoff

lows, strong close on this day when the

market faded a lot more off highs and

had a poring closing range. There's a

lot of elements of relative strength to

this name and uh just point to the fact

that this could be a leader in the next

uptrend and a leader that you want to

you know be focused on when a new

uptrend starts and really takes hold

like we've seen the past 3

[Music]

days. So welcome everybody to the next

traders handbook webinar on market

cycles. This is a very timely one as

we're potentially starting a new uptrend

currently. Uh so there's there's a lot

to cover. We'll talk about how to trade

market rallies, uh how to use

progressive exposure, and also how to

protect yourself when a trend ends and

we start entering a correction like

happened in uh the middle of December.

So, a lot to cover today. Um here's a

little bit about uh the weight list. If

you scan here, you'll get some extra

bonuses. Uh we'll be sending out the

market cycles model book preview, a

preview of the bonus model book that you

get uh when you order the book and send

us your receipt. And to receive that, uh

just want to be on the wait list. And

again, you can scan this QR code right

here to join that weight list. You'll

also receive all these previous bonus

articles as well as exclusive giveaways

and exclusive and priority access to

these webinars right here. So,

definitely join this weight list if you

haven't uh joined already. And hopefully

you guys have found uh these articles uh

nice and and timely and valuable as

well. Uh here is today's topic. Again,

we're talking about uh building a market

cycle system, how to trade market

rallies, how to use progressive

exposure, how to spot, you know, key

relative strength leaders early on. And

this coincides with chapter eight of the

handbook right here, which as I showed

previously, we finally have the physical

copies here. Super excited to be uh you

know, holding this in my hand. And

again, if you haven't picked up your

copy, you can click the link in the

description uh to access yours and make

sure you grab yours as well. We thought

we'd start this off with another great

quote from William Manneil. He's got so

many fantastic ones of course and this

one is at least 50% of the whole game is

the general market. And there's a lot of

depth to this very simple statement and

it's kind of the whole reason why we're

doing this webinar. You know, tracking

the general market and the overwhelming

trend, the longer term trend, the risk

appetite of institutions. Uh that's

really at the end of the day what's

going to set you ahead and allow you to

position earlier on when you notice

those character changes early and it

allows you to protect your profits and

eliminate or you know minimize those

draw downs when the trend shifts back

down to the negative after an uptrend.

So at least 50% of the whole game is

tracking that trend of the general

market. It's the M and can slim. So so

important and really our focus today

right here. And I think this is one of

the key things that

differentiates, you know, unprofitable

um inconsistent traders with, you know,

profitable and consistent traders is

being able to stay in tune with the

market and, you know, know when to get

aggressive as well as know when to get

defensive as well. So, this is a really

important webinar and I know you guys

will dig it and we've got a lot of great

concepts to share with you guys. So,

here's the overall agenda. First, what

is a market cycle system? How do you

create one from a highle perspective? Uh

then we'll talk about market gauges,

trading a full cycle from rally to

breakdown, finding leaders early,

progressive exposure. We'll show some

math behind that as well, which I think

most people, you know, don't really see

or don't fully understand. We'll discuss

some other important concepts like

stress tests and also how to approach

trading later in a cycle when things

have been, you know, going for quite

some time and uh, you know, you want to

adapt a little bit to that situation.

So, this is going to be really good, and

make sure you stick around until the

end. Um, all right. So, first things

first, what is a market cycle system? A

market cycle system, it's very simple.

It's a system for defining uptrends and

downtrends relevant to your time frame

and how you trade and how you trade

those different phases. So, how do you

trade early in an uptrend? How do you

trade later in an uptrend? How do you

trade an early downtrend? This system

kind of defines all of that for you and

gives you a lot of clarity. And like I

said, I think this is one of the

standout concepts that allows you to

transition from a stage two trader to

stage three or four. So, if you're a

stage two trader watching this, you

know, a boom and buster, um, you know,

this is one of the key systems that you

need to add to your process, to your

overall trading system to take that next

step, you know, to level up as a trader

and improve your performance. And like I

said, what the system basically does is

it gives you clarity about when and how

to enter during market uptrends and when

and how to exit uh when uptrends end and

we begin a correction or downtrend. Um,

and it can combine index analysis, trade

feedback, market leader analysis. We'll

be sharing a little bit about different

tools that you can use to build your

market cycle system. Uh but a key thing

we want to emphasize throughout here and

this this is repeated over and over

again. The best market cycle systems are

not intricate. They are simple and

robust. Uh you know the core of my

system is just using the 21 EMA on the

QQQ. That kind of sets uh you know is a

is my guiding light is what I say what I

like to say. So uh again we'll emphasize

this point quite a bit. Uh but first Ry

I want to before we move on I want to

hand it over to you to kind of talk

through kind of your view on market

cycle system. Why is it important for

traders to develop it? So one of the one

of the first things uh you want to be

aware of is some of the stats. Uh you

know Millie Mill says that 50% of the

stocks move as a market. Three out of

four stocks follow the market. And you

know, uh, most stage one and two traders

or phase one and two traders will always

not have a market cycle system and they

don't know when it's the, you know, when

what's a good time to step up exposure,

when's a good time to hold back and kind

of, you know, um, not be on the

sidelines. With the recent market, we

saw you know a lot of traders in April

March continuously trading on the long

side when the primary trend of the

market was uh down right and that's how

we get a correction or a deeper

correction and we hit that bare market

threshold as well. So this market cycle

system and what we'll discuss and how to

build this throughout this webinar is to

keep you on the right side of the

market. Now the the second component to

this will be the type of trader that you

are. As a day trader, you're looking for

magnitude and momentum for that day. As

a swing trader, you're looking for, you

know, momentum in the markets to be

directional. Be it up or down, doesn't

really matter. As a position trader,

right, more can slim style or growth

style trading. You're long only and

you're looking to ride those uptrends

and then be on the sidelines when you're

in a downtrend to be primarily cash. And

then we have investors who kind of don't

need that market timing element because

they're looking at 5 10 15 decades right

in terms of invest investing. So the

market cycle system in this concept is

for that day trader swing trader and

that position trader to really be in the

markets with high exposure when the

market trend is quite clear be it to the

upside or the downside and when it's

choppy and is not known be on the

sidelines as well. Most phase one and

phase two traders will what what they

will try to do is they want to be long.

They want to be short. They want to do

everything all at once. The best thing

you could do is just pick a side in the

market that you want to perfect. If you

look at 10-year charts and 20-year

charts, the the market tends to trend

higher, right? And that's just how it

is. So to to you know start your career

as uh I want to be a short only is

really you know not a a successful first

step for you to be in in the market. So

you know we'll focus on how do you

capture those uptrends? How do you

capture that momentum? A really clear

simple system for that will allow you to

transition from that phase one and phase

two to three and four to be that

consistent trader and then get into that

performance phase. Yeah. And and Ry, if

you can boost your volume on your side,

uh, please do so or just talk a little

bit louder. I boost it as much as I can

on my side. Um, but yeah, and I think

what Ry just said is really important.

Your market cycle system, like I say

here, is going to be different depending

on your time frame and trading style.

Investors might focus more on tools

related to monetary policy or or longer

longer term monetary cycles. You know,

what we're really talking about today is

much more applicable to swing and

position traders, especially of growth

stocks. And that's defining kind of a

daily uh not, you know, it uses daily

data, but it's looking at those trends

to capture those uh week-long moves,

month-long moves of uptrends and

downtrends between um consolidations,

corrections, uptrends in in the market.

Um especially in the QQQ, which is kind

of our focus today. So again, depending

on your time frame and your objective,

the type of trader you are, um you're

going to have a different market cycle

system that gives you situational

awareness about when to be aggressive

and when to be defensive as well. All

right, so here is uh you know a bit

moving forward. You know, why do you

need a market cycle system? Ry mentioned

this already. You know, three out of

four stocks follow the general market.

This is based on studies that William

O'Neal did as many others have done as

well. And you need a market cycle system

to know exactly when to be aggressive

and defensive and to help smoothen out

that equity curve, improve that equity

curve and try to limit those drawdowns

when we go from an uptrend to a

correction because it can happen very

quickly and we want to be on top of that

and min minimize the damage as much as

possible. Um and in addition to this a

market cycle system uh you know a lot of

people act in the market based on

intuition or perceived intuition

building structure around this and how

how when to be aggressive when to be

offensive helps you know manage the

emotions and take that part out of it

and just kind of build structure and

consistency around our decision-m in the

market which allows us to build

consistency over time and perform over

time. Consistent inputs allow us to

analyze them uh to tweak them to improve

the outputs. Right? We can't have we

can't improve a system if we don't know

what consistent inputs we're inputting.

And so again, just three out of four

stocks follow the general market. We

want to be trading with that overarching

trend. And that's the focus of today.

And I think we'll give you a really

concrete system to do that. We'll show

you how to build a market cycle system

from scratch using the QQQ and 21 EMA.

And just that simple system would have

protected you during this correction

phase right now and start started to get

you aggressive or or testing the market

during this rally that we're

experiencing. So there's a lot to cover

today. It's going to be really really

good. So again, if you're a STU trader,

this is a great webinar to be focused on

and I think you'll you'll take a lot out

of this. All right. So what creates

market cycles? Um human psychology and

trading have a relationship. You know,

overall the emotions and human

psychology in play of all market

participants comes together to create

the price action that we see. Uh the

moves in the indexes, the moves in

individual stocks, all of that is intric

intricately linked. And you know that is

what creates price action at the end of

the day. And what's awesome about this

is that human psychology has a pattern

and those patterns repeat themselves

over and over again. We see uptrends, we

see corrections, we still we see bull

bull markets, bare markets, all that

happens over and over again. And it's

not going to happen exactly the same

way, but those patterns are similar

enough that we can create structure and

build rules that define uptrends and

downtrends for ourselves and when to get

aggressive at the right points and when

when to get defensive at the right

points as well. And so what market cycle

system does is it captures both the

psychological and technical aspect to

again build that structure, build those

rules. So we have, you know, uh, guiding

principles to govern how we're trading.

Uh, Ry, anything you want to add about

on on this about human psychology and

how it how is displayed on the charts?

If we flip to the next, uh, slide, I

think that will capture, you know, much

of what I want to say. So in the

markets, we have these psych cycles.

They're mostly based on emotion and

price reflects that emotion in a really,

really good way. So what happens is

there's optimism, excitement, thrill,

but then that bleeds into companies that

have no business going up, you know, uh

but you know that leads to euphoria,

right? If you have AI in your name

recently, you were just going up. A

company that was selling, you know,

drinks, put AI in their name and they're

up 100%. That is the the euphoric part.

And then from there, we get into this

deeper cycle of capitulation. Over the

past five years, I would say we've seen

every single type of this uh you know on

this slide, every moment in the market

has been completely experienced in the f

last five years. We have had the best

uptrend coming out of 2020. We had the

quickest correction into COVID. We had

the recent you know uh tariff based uh

volatility right that led to you know

amazing crazy down days and 12% up days

right but the bigger part of this is

this once you understand where we are in

the cycle it will be infinitely easier

for you to you kind of look at the

markets and and kind of time the best

moments right we don't want to be part

of high volatility we don't want to be

part of uh you know uh rough trends that

are not directional but sideways and

will chop you into pieces. Right? If we

avoid just the worst down days in the

market and the choppy periods and wait

for that uptrend or those solid trends

where there's optimism and excitement or

there's you know uh new uh themes that

are coming up in the markets etc. we're

better off. And that's how equity curves

get smooth, right? Where we remove all

of the volatility, we remove all of the

uncertainty out of it and we wait for

those uptrends. And that's really what

we're focused on in this webinar is to

make sure you guys are you have high

exposure in good markets and extremely

low exposure in markets that are not,

you know, uh good for uh swing traders

or position traders or any type of

trader like we've seen recently uh in

early April. So, so let let's keep going

guys. Uh again, this curve I think shows

everything and we'll be providing

structure to show how this plays out on

the charts so you can build concrete

rules around it. And uh this is I I love

this cartoon. You guys have probably

seen it on social media before. Uh

credit to Kevin uh Keller. I'm not

exactly sure how to pronounce his name,

but he's a creator of this. Uh but you

know, I think this is a great reflection

of how emotions, you know, uh you know,

cascade in the market. And again, it's

not going to be as obvious as this. It's

more about extensions for moving

averages, extension the market. Um,

everybody focusing on Nvidia. It's a

it's it's subtle and it happens over

time. But again, over here on the the

left hand side, it starts, I've got a

stock here that could really excel,

really excel. Then that gets repeated.

Excel, excel, and it goes to sell sell.

And then somebody says, "This is

madness. I can't take this anymore.

Goodbye. Goodbye. Bye. Bye. Bye." And

then the cycle just repeats over and

over again. You know, everybody's

chasing performance. Everybody's

chasing, you know, the hot stock, the

hot tip. But if you're acting on

emotions, you're acting, you know, when

the trend is already well underway. And

we want to be participating early in the

uptrend as as you know, the reward is

worth the risk and then exiting when,

you know, that that dynamic shifts as

well. All right. So, from a high level,

how do you create a market cycle? And

we're going to go from high level to

really specific, guys. So, don't feel

like we're we're talking too much

philosophically here. We'll show you how

to actually apply it as well. Uh but

again the goal is to create a simple but

robust system that helps us define

uptrends and downtrends and how do we

create a framework to objectively

determine where we are in the cycle. Uh

we've got different tools that we can

use price action of stocks indexes

secondary indicators oscillators

breathmetrics. We'll talk a little bit

about you know the the weaknesses of

these later on. Um and we'll go through

all full example like I said in just a

minute showing how to apply with the QQQ

and the 21 EMA. But here are some

different tools that you can use. You

can have ideas, you know, moving

averages on the indexes, net new highs,

new lows, percent of stocks above the

MA, number of setups, number of screen

results on a screen that you review

every day, every week, the quality of

setups, a little bit more qualitative,

but the quality of setups and more

ideas, stock gauges, which we'll touch

on, name, these are all kind of popular

tools that you can incorporate into your

um into your system. But what I really

want to stress here is you only have to

pick one or two of these. And some of

them, if you do do decide to use them,

you want to make sure you go back and

study to see if it actually works. You

know, does name give an actionable

signal? Does uh the bears versus bulls

poll give an actionable signal? A lot of

the things that we see on Twitter are in

in essence, if you actually go back and

study it, a lot of noise. They give a

lot of false signals. And we want

something that is robust and works

throughout many market cycles. And for

me, the moving averages and price is the

most reliable thing. Um, you know, all

of these can work and and you might find

that they work well for you, but go back

and study it. Don't just trust some some

trader on Twitter that you see uh and

how they do things. You know, maybe

they've studied it, maybe they haven't.

Go and build your own conviction. And

this is kind of a highle concept that

we're talking throughout these webinars

when it comes to setups, edges. Don't

don't just trust people blindly. Go back

and try for yourself. do a deep dive,

see if it works, see if there's a better

way. Uh, right? Because you want to

build conviction. And the most

confidence you're gonna have in a

system, including a market cycle system,

is to go in and study it yourself. So,

these are ideas that you can incorporate

and explore. Uh, but for me personally,

and I'll talk about what I do later on,

the moving averages on the QQQ, the 21

EMA is the most key thing for me. And

then I do look at a few of these other

things, but this is really the most most

important thing. So, think about what

makes sense for your style. How do you

personally interpret the market? Again,

if you're longer term, you know, you

might be more more focused on what the

Fed's uh balance sheet is or something,

you know, whatever indicator is relevant

to the time frames and trends that

you're trying to capture. That's what

you want to incorporate into your market

cycle system. Uh Ryan, anything you want

to add here? Uh either about these tools

specifically or just from a high level,

you know, how you think about finding

tools that are relevant to you? Yeah, I

mean I I always feel traders use too

many and then what happens I used to do

that myself. I used to have a volatility

indicator, sentiment indicator, this

indicator or that indicator and usually

two out of the five would say you're

supposed to be buying and three out of

five would say you're not supposed to be

buying or three out of five would say

you got to buy and then two would say no

which would leave you in a state of

confusion. So the lesser you have going

on the better. One thing I've learned

over the years is that some of them are

best for extremes and other are best for

your primary trend when it's

established. For example, when we get

these investor surveys or uh percent of

stocks about 40 MA is a popular one,

right? Um those are best usually for

extremes and you can kind of scale into

the market at extremes, right? Whereas

the moving average is more of a more

established trend. the slope of the 21

which we're going going to talk about in

a few right it's established trend

liquidity is back you know high again

and things are looking good in the

markets whereas the other side of it is

you know traders try to take the extreme

ones and use them as the their primary

uh and it gets quite confusing so

exactly what Richard said you got to

pick one or two and have those be your

main drivers for progressive exposure

how you scale into the markets when

you're going to determine if it's an

uptrend or downtrend, which we'll get

into the next slide here. Yeah. And I

like what you said about having, you

know, things that you look at at

extremes versus kind of the established

trend because it's a good way to think

about it. And always remember, you know,

as as extreme as the Bears versus Bulls

poll can get, it can get more extreme,

right? Just cuz historically this means

it's an extreme doesn't mean it has to

revert. Um, you know, things can always

get more extended, all of that. So, just

just some things to remember from a high

level, taking a step back when you're

designing your system. So components of

a market cycle system and kind of what

we'll be talking about today. First

trend definition, uptrend, downtrend,

neutral, um cycle count. Basically, you

know, how long has the uptrend been

going on? How many days are we into an

uptrend or how many days are we into a

downtrend? And then we'll also talk to

me a little bit about journaling, you

know, journaling relevant data daytoday

uh stress tests, extensions,

anticipation, uh cyclical repetitive

characteristics, developing themes as

well. And then during during my kind of

daily routine, I like to note RS list

during a correction. And that's part of

my journaling process. Uh that helps me

kind of, you know, build a market cycle

and build a focus on on what to cover

and and what to focus on if we do start

an uptrend after maybe we're in a late

downtrend. So here are some basics. Um

first, of course, you want to pick a

market. Um and then, you know, we've

picked the spy in this example. Then you

can use a simple moving average right

here. And basically, if we're above it,

we're in an uptrend. If we're below it

and trending below it, we're in a

downtrend. So as an example, here is a

downtrend right here below the moving

average. Here is an uptrend below that.

It can be as simple as that. You don't

have to, you know, use all these uh

different data points and and confuse

yourself. Just keep it simple. You know,

above a moving average, good uptrend,

below it, bad downtrend. Um here is

moving forward. Uh this is kind of

counting below the moving average. So

the trend counts for the down cycle as

soon as we close below the moving

average. And then each of these days is

one more day below it. So you'd kind of

track this day to day and keep adding

this. And this is 20 days below the

moving average. And then this uptrend

was 21 days above the moving

average. Here's zooming out a little

bit. Just showing uh some system shop as

well because there's going to be false

signals. And guys, this is something we

emphasize later on. No system is

perfect. You just want to incorporate

something that helps you, that's a

guideline, that's helpful to you, that

helps you manage risk, helps you know

when to be exposed, when to not be

exposed. There's always going to be chop

like this. And for me, kind of when

there's chop like this after an uptrend,

I'm kind of um treating each position on

its own merit. So, if I do have

positions, that doesn't mean I'm going

to sell it because there's signals back

and forth. But, I'm just aware that the

system isn't necessarily in a strong

uptrend. So, I might not be as

aggressive as I would be when we get

back in to a nice uptrend like this. So,

again, just using a simple moving

average. We've got a downtrend defined,

we've got a uptrend defined, and then

when we're chopping above and below that

moving average, we're more in a uh just

a a chop phase in the system. Um, and

here's the uh strong uptrend later on.

Uh Ryan, anything you want to add uh

based on these slides and in terms of

identifying? Yeah, in terms of fa false

signals and how to tackle those because

that will be a common question that we

usually get. That's usually through

intuition and experience and see time

and seeing multiple market cycles and

you have this voice in the back of your

head that's kind of built over time

which will tell you that there's enough

setups in the markets. You're seeing

your edges and the setups are forming

accordingly. that will help you build a

bias at the end of the day as to what

kind of chop it is. Is it the type that

is going nowhere and your your setups

are failing? Right? Remember that the

market cycle is a is a huge component of

everything else that we've learned up to

this point. So, if I'm seeing setups and

I'm anticipating, in this case, we got a

46-day uptrend after that chop, usually

in that formation, there will be setups

that are showing that relative strength

edge. There's they're showing the

highest volume edge. The market is

developing potential in that system chop

area so that you know you're looking at

your focus list, you're maintaining your

watch list, you're doing your daily

routines, right? And then you're kind

you will get into that phase where you

can anticipate as to what the market is

about to do. Right? Recently in April,

the last week and a half, we had a day

where the NASDAQ was down 3%. And the

stocks on my watch list were not down

3%. I expected them to be down 5 to 7 to

8%. And there was complete shift as to

how stocks were behaving and how the

market was behaving. Right? So that

information coupled with what's about to

happen led to that 15% move in the

NASDAQ over a span of four sessions,

right? We rally right up. But that

potential or that system chop or

whatever you guys want to call it, there

has to be secondary information which

we'll get to later webinars. That's

routines. Doing your daily routine, do

your week again routine. So there's

components to the system that we're

building. Market cycle is one of them.

There will be system chop. There will be

areas where you you're kind of confused

as to what you're supposed to do. But

over time, when you're phase three and

phase four and you have seen 15, 20, 30,

40 market cycles play out, right? Over a

span of five to six years, it will just

click, right? What we're trying to give

you is a system where the phase one

trader does not know what a market cycle

is. The phase two trader has no clue how

to, you know, get rid of those boom and

bust cycles that it helps them get to

three and four, but then intuition,

second nature, looking at the markets in

a different way, psychology plays a

bigger role, those things come into

play. But if you're phase one and two,

have a market cycle system for you to

even get there to get that seed time to

get that build that sec, you know, a a

voice that will talk in the back of your

head to say, "Okay, things are about to

go uh to the upside or the downside."

Yep. Perfect. All right. And this this

ties in perfectly journaling your market

cycle, keeping a log of your market

cycle and each day jotting down notes

about the price action, the themes you

see developing, the leaders, how they're

acting relative to the market. You know,

if they're breakouts during a

correction, that's something to note.

All of this will help build that

intuition. Again, if you're stage one

and two, this is more just collecting

the data. While stage three and four,

you can really interpret and anticipate

market cycle changes based on this data.

But having this log will help you know

when to position size the highest,

anticipate stress tests and how to

handle them, when to reduce position

sizes. Um, you know, gain knowledge

about the market environment and health

in general before it's really reflected

everywhere else. And also just keep a

historical diary of themes and when they

work best, which is can be helpful in

building model books and and going back

and and studying yourself and how to

improve. And just in general, journaling

and collecting this data helps build

your confidence and boost your mental

game by staying on top of what's

actually going on in the markets. And uh

so so what do you kind of need to track?

Again, stress test and uptrends, short

covering rallies, which are kind of

quick moves up when we're in a down

cycle. uh what themes are leading,

lacking, key breakouts and moves, and

any kind of repetitive and cyclical

market action driven by events. You

know, whenever um if the Fed is really

what the market cares about, that's kind

of the overarching fundamental factor

driving everything. Um if there's a Fed

announcement, I'll kind of note that in

my journal or note that on the charts so

I know that a big move was created by a

Fed announcement or minutes being

released. Um, you know, if inflation is

what's what's being is what's being

cared about, you can take a note about

what CPI is doing. Right now, it's been

all about tariffs and trade deals. So,

any news relative to that? That would be

kind of what you want to include in in

your market cycle journal to keep track

of what's actually driving the market.

Um, right. Anything else you want to

talk about journaling? We'll show an

example in just a second, but anything

else you want to cover? I I would say

just noting these down and over time

you'll build you know uh many years of

uh and many cycles what will happen at

that point is that you will connect one

market cycle to another market cycle or

things will feel the same from a

technical perspective as to hey this

reminds me of this particular you know

year that I was in this reminds me of

this moment in the market why it feels

very similar right and what happens is

That feeling that you develop as to what

the market can do next is the place that

you want to get to. And journaling the

market cycle is how you get there

essentially. So there's some people that

will say, "Hey, I don't need this. I

don't need to jot this down. I can have

muscle memory type of, you know, thing

where I I can, you know, remember

things." Well, for me, I find it that if

I write it down, if I have a journal of

it, if I can refer to it, you know, a

situation back in, you know, 3, four

years ago, then I'm I'm better that way,

right? So, whatever works for you, but

just keeping a log of it will help you

build that muscle memory. It will help

you identify uptrends quicker and

identify corrections quicker as well

over time.

Exactly. And we want to touch on this

concept because I I think it's something

to really recognize for yourself. What

is a stress test? A stress test is

basically after initial strength, maybe

seven to eight days in, you might see

your first one. You'll see a day where

everything drops or everything pulls

back in um at the open. Um and you want

to see how things act. And this can be a

a great test of the rally attempt. and

you know you'll be able to sort the

wheat from the chaff and identify the

leaders that held up the best and um

basically you know add to that position

you know just focus on that a little bit

more going forward but they're they're

negative in the sense that they they

cause a drop in the market stress test

and they put pressure on things but that

pressure reveals the diamonds right it

reveals the names that you really want

to be focused on during the uptrend and

how how it and and going forward at the

next setup um closes matter and how we

act after the stress test is really

important. Do we bounce back

immediately? If not, and we start to

really roll over, maybe that rally

attempt is just failing. But stress

tests in general aren't things to really

fear. They're things to expect and to

plan for accordingly. So, you want to be

mentally prepared going into them. Um,

or, you know, after we've been up three,

four, five days in a row after, you

know, the start of a new rally, you

know, know that we might have a pull in

pretty shortly. uh and know your top

ideas, know the names that you really

want to hold on to, know the names that

you want to work yourself into if there

is a lower spot that develops on a

pullback. All of this should be thought

about before so you're actually ready to

go. You've got a game plan all that. Uh

Ry, I know this is your concept, so I

really, you know, you're the best person

to explain uh stress test. There will be

moments along the way as you know when

markets shift trends majority of the

market participants have to not believe

in the move for the move to actually

happen right if everybody is saying that

the market's about to go higher. We're

in that

euphoria, you know, type of time, you

know, psychological phase, right? Right

now, we're kind of in that phase where

the market's rallying up the right side.

We're we've hit the market cycle count

is plus three as of Monday is going to

be plus three. Majority of market

participants don't believe in this move.

That's where we want to be. Now, what

happens is along the way to kind of

convince them that we're we're still we

might pull back or to scare them to or

or whatever the case might be, the

market pulls back to kind of, you know,

keep them on the sidelines, right? And

that's essentially what a stress test

is. It's the most important day during

uptrends that gives you information as

to how the leaders in the market are

acting, right? If let's say we pick Hood

or Palunteer or any recent breakout that

we've seen, you know, during the week of

April, the last two weeks of April,

those stocks that are supposed to pull

back, let's say, you know, 5 to 7% when

the NASDAQ is down 3%. And they're only

pulling back 1 to 2%. That's a clue.

Those days, the the stress test days are

the most important days. they give you

the most amount of information as to

what will happen after the you know the

pressure lifts in the market once again.

So the I always stress that you know the

the days that are up in the markets are

the easiest. There's nothing to do.

You're just looking at it. Everything's

going up. You're part of the trend.

Everything's you know it's not even a

job at that point. You're just sitting

there looking at the numbers move.

Right? The best days are when you get

that pullback. How are your positions

acting? How are the things that you're

looking at in terms of a setup that's

forming? How are they acting? What are

they telling you while the market's

pulling back? Right? The news, the

media, uh many people tend to look at

indexes and if the indexes are down,

that's the only layer that they're

looking at. But those days are the most

important ones because those palenteers

and the hood, Netflix, right? All those

three names were not down as much. They

were showing relative strength on the,

you know, down days in the market. And

that was a signal, hey, the market's

going to as soon as, you know, even if

we get a slight update, these things are

going to explode 20 30%. And which they

did. Palunteer did, Hood did, Netflix.

Those are recent examples that I'm

trying to uh uh, you know, point out

that you guys can study after the stream

today. So, yeah, I I really like what

you said that, you know, if you're an

average market

participant and you're on this day or

this day right here and you hear on the

radio or whatever you get your news, the

Dow was down a,000 points, there's no

change in your perception of the market

on this day or or this day compared to

this day right here, which was also down

500 points, 700 points, whatever it is.

But if you have a market cycle system

and you're studying this, you recognize

that even though we had a stress test,

we recovered quickly, we bounced back,

reclaimed the moving average, we didn't

follow through to the downside, and

we're forming higher lows here. So, this

is very different if you have a market

cycle system. But if you don't have a

clue or aren't paying attention, that's

where, you know, you get you're you're

late to the party because the uptrend's

already started and by the time you

start to get bullish, we're already

middle in the middle of the trend or

later in the trend. And that's really,

you know, the key thing here with the

market cycle system is we want to

prevent you from, you know, going 150%

long on this day and then we get a

stress test. You sell everything and

then it just recovers and goes without

you. Uh you try again up here. Uh you

experience another stress test, sell

everything and it goes up without you.

We want to build structure so you're

getting exposed at the proper points,

managing your risk along the way so you

can participate early in the trend and

benefit from that trend in your equity

curve. That's really the bottom line of

what we're trying to do here. Uh, so

handling stress tests. Here are a few

things to to think about. After you get

initial traction on your positions,

assess stops to guarantee a higher low

in your equity curve. Ry, you're huge on

this. I definitely want to hear you

explain it in just a second. Uh, know

your total open risk. We talked about

how to calculate that in the risk

management thing. Know how much um to

open risk you're willing to take on,

whether that's 2%, 3% in the star of a

new uptrend. Um, you can anticipate

stress tests, especially if you're more

stage two plus, stage three, stage four.

Uh so you don't get ahead of your skis

in terms of exposure. You're

anticipating them and maybe you're

looking to even add on stress tests. And

then for any position you have simply

having a plan if we do pull in hard and

everything's pulling in at the open 3%

5% because that's how growth stocks do

it. Having a plan helps you act, you

know, rationally in the moment. Follow

what what your follow your discipline,

follow your structure, follow your

system. All of these are really

important things to remember in terms of

handling stress tests. Right. anything

you want to add in terms of preparing

for these events um and handling them in

the moment. You'll learn to anticipate

them as the market, you know, rallies.

There will be these stress tests that

happen along the way and you will learn

to expect them. You know, a day or the

week is not going to be just straight

up, right? Uptrends are not straight up.

Downtrends are not straight down, though

sometime most times they're starting to

be now. So, um, with uptrends, you know,

you'll say if you're making progress and

and your portfolio's moved 10 to 12%.

It's a healthy move, you know, thing for

it to come back four to 5%, consolidate

out, and then keep going, right? The the

the biggest thing here is the

information that's dished out on these

days determines what happens next in the

markets, right? Just focus on that. What

is your portfolio telling you? If the

NASDAQ is down 2% and your portfolio is

down 12%. The market's about to pull in,

you know, because the stocks that you

own, assuming they're leadership stocks,

liquid stocks, stocks that are part of a

good theme, which we'll get into the

next slide, etc. If those stocks when

the NASDAQ's down two or going down 10%,

get out the way. Right? That's the type

of information that you're getting. If

the market's pulling back in and your

stocks are fine, they're flat on the

day, right? Uh that's good information

because the stocks that you own one are

acting well. Second, the market

leadership is also acting well. So

there's nothing to be stressed about,

right? The information that you're

receiving on those down days is good

information. You can use those days as

putting on additional exposure, right?

If you're if you only have 30% exposure,

for example, you can increase that to

45% then. Right? So, I usually use these

days to either determine, do I need to

play a defense going forward or I can

really press and get more exposure on

because we're in a positive market

cycle, right? So, use these are the best

days. The other days don't really matter

to me because they're just, you know,

you're either chopping, you get this uh,

you know, a candle with a narrow range

or you're up on the day. Those are very

easy to just sit there and do really

nothing on. But these days, you know,

when we're having a gap down open, what

information are we getting in the first,

you know, 90 minutes? What information

are we getting in the last 45 minutes in

terms of a close? That's why it makes,

you know, the down days are much more

important, assuming we're in a in an

uptrend than the up days uh are to me.

So, yeah. And in terms a little little

note on anticipating stress tests, you

know, something I always keep in mind

is, you know, how many days up in a row

have we been? Are we approaching three

to five days up in a row after a trend's

been established? Are we a little bit

stretched from the moving average um

after getting, you know, showing some

power off the lows? These are all things

that, you know, you can keep track of to

say, hey, you know, we might have one

next session or the next three sessions.

You're never going to be perfect, but

you can try to, you know, anticipate it

so you can expect it and plan for it.

You know, to use this as an example,

here we're up, you know, 10 days almost

in a row, almost straight up. Uh here we

had a gap up, we followed through

higher. We have an inside day that

closed near lows. What happens the next

day? We get a stress test and big down

day, gap down, fall through down. Uh

that ends up getting supported, positive

expectation breaker and continues

higher. But you know, being aware that

we're up significantly over the past 10

days and that we're a little bit

stressed in the short term can help you

anticipate that we might have a stress

test the next session or the next three

sessions. That's just kind of what I

keep in mind uh when I'm thinking and

and how I'm trading as well. Um so Ryan,

you want to take uh the importance of

themes?

Yes. So uh one of the things when when

you're looking at market cycles is one,

we're trying to put the market, you

know, the wind of the market behind us,

right? Three other four four stocks

follow what the market is doing.

Anyways, the second part of that is if

you're in a good theme, for example, the

semiconductor theme in recent years or

the AI theme or uh a particular biotech

area in terms of pharmaceuticals, right?

Or weight loss drugs recently. So, you

identify pockets of you know, you know,

the you check off that the market's in

an uptrend, but what's moving up? What's

the next kind of the big thing? You know

software was huge in 2016 17 and 18 that

started massive runs of 400% 500%. 800%

in some of these names, right? So, you

want to identify which pocket, yes, the

market's moving up, but if we end up

buying uh Bank of America stock, that's

not going to move the needle uh at all.

Or if we end up buying um a financial

stock or a company like JPM, that's not

going to double your money in a short

span of time, right? Yes, you will

identify the trend. You'll pick a stock

that's, you know, doing well. Maybe you

go into a Coke or a Pepsi. That's not

our objective in the markets. Our

objective is magnitude, momentum, and

being in an uptrend. When we're in an

uptrend, having the most amount of

exposure, right? So, identifying themes

within uptrends can be part of your

journaling as part of your market cycle

journaling. Right? I always say, you

know, I want to be I want exposure in

the AI space. I want exposure in the

software space cuz I see five to seven

to eight stocks in the same space highly

liquid high market cap moving to the

upside and if I am in those right and

I'm deliberately placing my money in

those in that particular industry while

the market's going up there's a greater

chance of me outperforming the markets

uh quite often. So this is an important

part of it. It's, you know, you

establish that the market's in an

uptrend, but as part of your analysis,

and we'll get into this from a routines

perspective as well, you determine what

the leadership groups are in the market

and your your exposure that you have in

the market should be reflective of

what's leading the market higher, right?

So, those are usually not utility plays,

usually not safety plays, usually not

tobacco, usually not real estate or

REITs. They're they're not those type of

groups. They're the new things that are

coming in the market where they're

trading at a huge multiple. They're

moving 30 to 50% in a shortest span of

time. They will make a meaningful

difference uh to your portfolio. And I

think a common follow-up question here,

you know, we talk about how important

themes are. How do you identify the

leading themes? Uh we've done different

webinars on that, but very very quickly,

you want to keep track every day and

build an RS list and just a leadership

list of what the strongest stocks are.

And if three out of 10 of those are from

cyber, that's probably an area that you

want to be focused on. Um, if you know,

CrowdStrike is breaking out ahead of the

market, that's a potential leader that

you then you want to take a look at the

other cyber names to see, you know, are

they supporting it. Oh, Octa is also

breaking above a moving average. That

gives, you know, additional evidence and

we're really being detectives here. That

gives additional evidence towards that

theme could be a leadership green theme.

So you just want to pay attention every

single day what stocks are

outperforming, what stocks are leading

the market in terms of their cycles,

individual soccer cycles compared to the

market. And that's that will point you

towards the themes. And that's kind of a

bottoms up approach. You can also do a

top down approach. You know, what ETFs

are strongest. What ET what ETFs have

been performing the best over the past

20 days. You'll see semiconductors, if

they're going to be a leadership group,

they're going to be performing the best

over the past 5 days, 20 days. And we

have performance charts in DFW that I

take a look at every single day as part

of my routine. And we'll talk about that

in the routines webinar that helps point

me from a top- down approach. What are

the developing themes as well as the

existing themes in the market recently,

you know, before before last week really

miners were dominating everything

because that was the dominant leading

group. But as things change, you know,

very quickly those performance charts

can tell you where the puck is where the

puck is going so you can identify these

themes a little bit faster. But again,

we'll dive a lot deeper into that in

this in the screens and and routines

section. Uh the screens and routines

webinar. We talk about that in the book

as well. How to identify themes. Uh so,

you know, more more of that to come. All

right. So, here's an example of, you

know, a very quick journal that you can

do. Here, of course, is the date. Then,

we we note down the trend day number

based on if we're above or below a

moving average. And then we have a quick

note on the market action. And it can be

as quick as this. you know, wide-rated

inside day after a big extension. You

know, hu huge day on tariff pause.

Again, what is the dominant fundamental

factor that the market is caring about?

And we're only caring about a

fundamental factor because the market is

reacting to news related to it. Um, and

that's what we note down here in the

notes. You can also note down your RS

list here. You know, if you notice crowd

strike acting best on this day, breaking

above the 21 EMA when the market is

still below it, that would be something

to note down here. As well as, you know,

just overall thoughts on what themes are

developing. Uh, but this is kind of a

quick example. You've got the date,

you've got the trend day number, and

then quick notes about that day's

action. We don't want to make it this

huge thing where it gets so detailed

that you won't do it. We want to be

consistent. That's the most important

thing. So, you can connect your your

your current state to past dates and

learn from past dates and uh, you know,

use those as templates to go forward.

Uh, Ryan, anything to add on on

journaling? No, I mean, you're three

things. uh one uh you know the type of

day it was uh in the markets what

happened journaling that uh I like to

journal themes so if I'm seeing

divergence in you know a particular

group moving up while the market is in a

down cycle right we had a 42 days down

cycle into April 23rd which turned into

a positive cycle on April 24th right um

now this this tells you the power of it

right away right the last 42 days if you

spent time just you trying to time a

bottom in the markets, you were highly

unsuccessful or even if you did catch

it, it was for a very short span of time

which would have left you, you know,

confused and dazed at the end of the

day. So, you know, having this and then

knowing that, okay, the winds about to

turn uh right around, you know, I would

say April 17 to April 22 area, we

started to see decoupling in the

markets, right? Market was down, stocks

weren't down, etc. And then right before

that now we're seeing starting to see

some signs of an upside rally. U now you

know taking each of these days you know

noting down what's happening in terms of

why it's happening if it's news-based

that's the worst type of market because

news can change on the fly rights can

fly all all over the place. Someone said

this someone said that some news outlet

puts this news out etc. But then we get

into that where hey the market's

ignoring the news. the news does not

matter anymore. Stocks matter more than,

you know, than the indexes themselves.

Indexes are moving wild, but stocks are

narrowing in their ranges on down days.

Those observations will pile into, hey,

I've seen this before, right? And I

think, you know, it's a good time to

you'll start to anticipate the next move

that the market's going to make and it

will make you a really, really good

trader in terms of when you get into

that performance phase eventually. Yeah.

And just based off these notes, you can

like Ry said, you can sense the shift.

We start with an extension. This is how

a lot of corrections end. We get a big

extension down after we're already

extended, a reversal back up, showing

that the market's being supported there.

Doesn't mean that's the time to act or

the best riskreward spot, but it's

something that you're noticing and

studying past market corrections. That's

often how they end or the start of the

end. Then we get a wide range inside

day. still volatile, still volatile, not

really want to get involved yet. Then we

get a huge update on a tariff pause

again. The the thing that the market

cared about reversal, you know, huge

move back up. Then we get tightening

action. We get a gap down, but then the

market gets supported. We get more

tightening action. We get a gap down

again, but we close off lows. Then we

get a gap up, positive expectation

breaker, maybe a higher low is in. Then

we continue to see additional

confirmation, additional hints and bits

of evidence that the trend is changing.

And this shift all the way from April

7th to, you know, when when the trend

really changed on April 24th, that's

what you'll start to take into as inputs

when you're stage three and even late

stage two as, you know, signs that, hey,

I really want to get into my routine

now. I really want to have a RS list so

I'm ready when the market trend changes.

So again, doesn't have to be too

detailed, but should be detailed enough

that it gives you useful information

when you look back on on your notes as

you jot them down. Um phases of a market

cycle. So we've kind of split split it

into these kind of different buckets. Um

you could split this up as much as you

want, but you know there's early

uptrend, lots of uncertainty, the news

will be negative, but the market ignores

it. Um you know maybe um next week

there's uh and we actually started to

see this. you know, there was uh

frustration with the trade deal in

China, which the market really cared

about, but the market and leaders still

acted well. So, that's negative news

that the market ignored or acted

positively on. Uh market leaders early

in an uptrend will be showing RS and

beginning trends ahead of the market or

with the market. Uh they'll be bouncing

strongly off lows. Then in the middle of

the uptrend, they'll be start to see

more positivity around the u the big

news event that the market cares about

at that time. News is resolving. Market

leaders are trending. secondary names

are breaking out and starting their own

trends. Laying the uptrend, we finally

shifted from uh you know hesitancy and

uncertainty to now strong optimism. News

looks very promising and but at that

same time the market leaders they've

already been trending for quite some

time. They'll lose steam, break down.

Secondary names are still trending but

maybe showing signs of weakness as well.

Maybe really speculative stuff is going

crazy late in the uptrend as well as you

know money rotates around. there's a lot

more uh whips saws up and forth,

volatility increases. These are all

signs of late uptrends. Then early in a

downtrend, news may still be positive,

but the market acts negatively. Or maybe

there's a sharp new negative news event

like more tariffs or or something

game-changing again and the market just

really reacts and takes a um takes a

negative stance on that. You know, we

saw that in December before all that

chop that really was created because the

Fed came out and you know, gave negative

news again. and that is what the market

really cares about. Um, so you want to

be aware of sharp negative news that can

change everything and uh just be aware

that that might change the market

conditions. Market leaders early in a

downtrend uh will be breaking down

sharply but the strongest ones might

still be holding up a little bit and it

might kind of suck you in on a buy point

when the overall market is breaking

down. So that's something you have to be

aware of. Uh volatility is going to

increase. Uh then in the middle of a

downtrend, news gets more negative.

Rallies entice people in. there's still

high volatility, still hard to manage

risk. Then later in a downtrend, things

get kind of exhausted to the downside.

There's large swings, but not much

further downward progress. Um, new

market leaders begin to show us, and

that's when you want to start be paying

attention so you can anticipate and be

ready for a potential new uptrend. And

just in general, an uptrend can last a

lot longer than a downtrend. So, a down

cycle can be a lot more a lot quicker, a

lot lot more lot sharper as well. Um, so

that's something to be aware of if you

want to protect yourself early on, but

also you don't want to get too negative

when we've already we're already down

10, 15, 20%. Because historically, you

know, if things resolve, things can

shape up pretty quickly. And that's kind

of the type of percentage loss which can

lead to a new uptrend. So, um, just in

general, again, this is a lot faster and

this can take a lot lot lot longer.

Maybe this lasts, uh, months, maybe this

lasts weeks. Uh, but of course, there

can be a 2022 bare market uh, which

lasts a lot longer than that. So take

everything um as it as it is, but you

can always use historical precence as a

guide as a guideline for when to start,

you know, know when to pay attention a

little bit more closely. Uh right,

anything you want to add on phases of a

market cycle? No, it goes handinhand

with journaling. Uh and you'll notice

these the more you notice them, the

better you will be at identifying them

and looking for these things. You'll

kind of know what the market's doing

next. Most traders will tell you that

when the market starts to ignore news,

then it's more technical based, which

basically means that liquidity is back.

And when liquidity is back, range is

narrow.

Volatility itself goes away and it

becomes a lot easier to trade. When we

say it becomes a lot easier to trade,

you can define your risk. You can define

your entry areas. You could define which

stocks and which groups in the market

are acting well and where you want your

exposure to be. In highly uncertain

markets, it's really, really, really

hard to put on, you know, exposure where

one day you might be up 14, 15% and the

next day you're down seven. That

volatility is hard to deal with no

matter how much experience you have in

the market. And the most experienced

people that you'll speak to in the

markets are trying to avoid volatility

uh or rash, you know, moves to the

upside or the downside. They just want a

quiet period where the market's not in

the news. The market's not based on one

person saying something. The market's

not based on tariffs and all these trade

deals. The market's just trading on good

solid growth or uh certain industries

and you know that are going to double

and triple in terms of revenue, sales,

etc. where that type of environment is a

really healthy environment to really

deploy a lot of capital instead of just

putting on you know some feeler

positions or nibblers or etc. which is

kind of just busy work, right? the real

work happens when you know volatility

dies down, news is not a factor and

things are just trending really well uh

regardless of what anyone or uh some you

know is saying or or trying to influence

movement uh in the markets. So yeah, and

that's another thing to add and I I

mentioned volatility here, but there's

going to be a lot of gap ups and gap

downs during these downtrend periods.

And in the early uptrend, we'll start to

see less of that and more tightening um

tightening action. And again, that's

that's where we can manage risk like Ry

said. And that's when we we can get more

aggressive in the markets as well. So,

let's break it down a little bit into

each of the the different phases and and

how to trade them. So, trading early in

uptrend, you can start taking positions

when your cycle goes into an uptrend.

Early on, breath will expand. stocks and

positions should naturally build profits

for you and you can quickly use

progressive exposure um to to scale up

or you know depending on your your stage

I know Ry you want to talk about this a

little bit stage one two traders it's

it's a lot different than when you've

got that intuition stage three stage

four in terms of using progressive

exposure to scale up versus becoming

more aggressive earlier on so Ryan you

do you want to expand on that concept

yeah so um trading early in the uptrend

so what happens is essentially let's say

the market is down, stocks are going

down, we're seeing a trend reversal.

That initial trend reversal and those

initial days, the day one, two, and

three is when you're supposed to be

positioning yourself because all the

homework that you've done, right? Uh how

does a downtrend end? We see stocks

start to ignore news. Stocks trade on

their own merit. Market is down, but the

stocks are not going down anymore,

right? So that evidence builds as you're

in that downtrend. And then when the

market cycle triggers to the upside, you

should know your leadership group. You

should know a list of stocks that are

exhibiting relative strength. And when

the market's in an uptrend, it's time to

act, right? It's not time to collect

information. It's time to use the

information that you collected near and

the end of a downtrend to then deploy

capital in on day one, two, and three.

Those are the best days to deploy it.

Those are the best days to put on

exposure. Those are the best days to

make really meaningful progress right

away. That puts you in the driver's

seat. Once you're in the driver's seat,

you got to dictate when there's a stress

test on day five. You'll be sitting

there and watching the markets because

you're in a good position. You put on

45% 50% 60% exposure and you're trying

to get to 100%. Right? Whereas the

trader that is noticing the trend at day

four, five and six is going to encounter

that stress test and it's going to flush

them out of the market again because

they are a little bit late to the game.

They didn't interpret that, you know,

the decoupling action or stocks ignoring

the news or stocks not going down when

the NASDAQ's down 2%. So early in the

trend matters. It good positioning. Like

Ross says, if you if you're not buying

right, you're just buying at a spot that

puts you in a bad place for you to get

stopped out, right? So, it it's super

important and and the market cycle helps

you do this, right? Uh it helps you

identify themes. It helps you identify

which stocks are about to, you know,

turn. Helps you identify that the

market's not news-based anymore. I can't

emphasize this enough. A lot of traders

get in the game too late just in time

for that stress test. The stress test

flushes them out. They're still in cash.

The market rallies back up. By the time

they get in again, another stress test,

they're flushed out again. And the whole

uptrend, initial uptrend, the 10 12

days, they're just out of the market

where where they're supposed to have

heavy exposure, they're kind of, you

know, one step behind. And when you're

one step behind, there are many things

and many excuses I've heard over the

years talking to thousands of traders

from the market, you know, is after me.

They're hitting my stops. They're

placing, you know, they're pushing me

out and then rallying. They they they

there is no they you're just a little

bit late to the game because you don't

have a market cycle system, right? So,

and you you mentioned decoupling action

there. Uh define that for people. What

is decoupling action? Decoupling is

essentially when uh you know the stocks

that trade within the market don't care

about the influence of indexbased action

upon them. Right? In a downtrend what

happens is when it's when a market is

moving down 10 to 15%. It doesn't matter

if you're the best company in the world,

you have the best sales, you have the

best earnings, you have the best

fundamentals, you've released a new

product, you've put out a PR. If the

market's in a downtrend, you're going to

get trashed, right? But what happens is,

right when that downtrend is about to

shift from a market perspective, stocks

start to kind of sniff that. they kind

of have that you know sense or ability

and in you know institutions come into

the right ones and they start

accumulating those and that accumulation

results in relative strength and that

accumulation results in decoupling. So

what will happen is there will be couple

of days and this happened last you know

this April as well uh recently where the

NASDAQ or the SPY will be down from an

index perspective will be down a lot and

what will happen is the stock that

you're looking at Palanteer hood Netflix

and all of these recent ones they did

not care about the market anymore right

and those are the days those were the

days you know you're seeing a stress

test in the market but the stocks are

not

equated hood to be down, you know, 4%,

5%, it was flat on the day, holding that

$40 level, right? Continuously tracking.

Hey, why is this holding this level when

the market's, you know, pulling back in?

Why is it doing that? Why is it doing

that? And it went from 40 to 50 in 3

days, right? So, that's what decoupling

is. Stocks ignoring market action.

Basically, stocks ignoring news, right?

Uh, and trading on their own merit. When

they trade on their own merit, it's a

lot easier. You can define levels. You

could define risk. You know where you're

getting in, you know where you're

getting out. What if it's index based?

You have to wait overnight. What is

China going to do? What is this company

going to say? What is uh you know what

new cycle is going to run overnight?

Where is the index even going to open

right open down 3% 5% 10%. You don't

know. But once all all of that's kind of

gone and stocks are just trading on

their is it a good company? Does it have

the good fundamentals? Is it increasing

revenue and sales? Is it the first

positive EPS quarter they've ever seen?

It becomes a lot easier, right, to

trade. Perfect. So, getting more into

progressive exposure. Again, this is

more for uh those who really need

structure. Stage one, two traders. You

know, you want to listen to your trade

feedback. You can scale up, scale down

depending on that feedback. Uh start

with one half positions uh when we we

begin a new market cycle. Quickly go to

full if they make progress. You can

always think of it in terms of total

risk. How much are you willing to risk

to try this new uptrend? Are you willing

to risk 2% of your account to

potentially gain 5, 10, 20% in a strong

uptrend? That's kind of the question you

need to ask yourself. And I've got, you

know, a quick some quick math stuff,

some hypotheticals here to try to help

explain progressive exposure and how to

think about it, especially for shorter

term uh so sorry, more beginning

traders. um to kind of show the math

behind it and how you can manage your

risk. So bear with me. You might have to

rewatch this a few times to really

internalize it. But let's say a market

cycle begins. You decide that you're

willing to risk that 2% across a few

trades to see see how this trend does.

So you risk 2% across four potential

leaders that have shown consistent RS.

You've been doing your journaling.

You've identified them. They're the

Crowd Strike PLTR Tesla of of that cycle

potentially. Um, so you have four 10%

positions. Again, this is for um for

more beginning traders with an average

of 5% stops. I like to keep it a little

bit tighter, but we're using 5% for this

uh for this example. You could also use

20% positions with 3% stops and get

pretty much the same risk profile here.

Eventually, three work and gave an

average of four 4% for you. So, you're

at 4% profit on average for three out of

the four positions you tried, but one

stops you out. What's the math behind

this? What's your portfolio difference?

The result is a loss of.5% plus a gain

of 1.2% of your account because again

three positions are working for you.

They gain on average 4%. So on net you

have 7% equity increase and positive

feedback. The three out of four of your

trades that you tried worked. So you

have positive feedback. the next day

because you've got that positive trade

feedback, you're going to try three more

trades on three different market leaders

or maybe even one of them is one of the

stocks that stopped you out and is still

set up overall but just stopped you out

and you're increasing your position size

slightly because you're getting that

positive feedback and you want to do

this quickly over those first few days

of a market cycle. So you try three more

trades at 15% positions with 4% stops

around 1.5% more equity risk and now

you're at 75% exposure because you have

three stocks at 10% exposure and then

three more stocks at 15% which in total

is 45%. So 45% plus 30%. Out of these

three more trades, two out of three work

and rise 5% for you and one stops you

out. So trying to be realistic here. The

three original positions also rise an

additional 3% each. So, those are still

making profit for you. What's the

result? You have three stocks that are

now up 7% on average. And you have two

stocks that were 15% position sizes that

rose 5%. That's this 1.05. And then you

have one stock that was 15% size that

declined uh 4%. So, net net you're up

now, you're day two of the market cycle

and you're up 3% in your equity curve

and currently have about 60% exposure.

So still room to to increase that if the

trend keeps working. But this is kind of

a realistic way that you might, you

know, build exposure and build core

positions and then later on you look to

add at logical spots, add new positions

as they continue to break out because in

the first few weeks of a market cycle,

that's when new leaders will be

continuing to break out. So this is kind

of a good example and hopefully this

makes sense to you. And again, you might

have to revisit this, re-watch my

explanation, um, and maybe do the math

for yourself as well about, uh, the

different position sizes, what profits

you have on them. But this is showing

the math behind progressive exposure and

how taking stops and and listening to

market feedback uh can can change how

you trade and how aggressive you are

early in an uptrend. So that's a

positive case. Obviously um you've got a

pretty good bag batting average. You've

you've timed it pretty correctly. You've

you've looked at the right stocks and

identified those. It's not going to be

all as rosy as that all the time. So,

what if we reverse lower instead of

taking all the stops on those first few

positions as well as those additional

three 15% positions? Well, you had 30%

at flat. Basically, there's no gain on

those because you had you'd raise your

stops to break even. And then on those

three 15% positions, you lost 5% each.

So, you do have a 2.3 equity loss. And

likely, this the market is rolling over.

We had a stress test that then really

led to additional um move lower in the

market and stopped you all out. And you

do have a 2.3 equity loss, but that's

part of the game. If you you've listed

another day, 2.3% is easil easily

recoverable when the uptrend when a new

uptrend starts again. So, what if you

had moved your stops up to original

positions uh to 2% in the money instead?

Well, instead of being flat on those,

you'd be up 2% and then the same decline

on those three additional and you'd have

a 1.7% equity loss. So, still you still

losing money but losing less money. But

if you had moved up stops on positions

and new positions when they rose 5%,

you'd have a gain of 2% on those three

10% positions and were flat on the

remaining. And uh basically you instead

of sorry there's an equity gain here not

loss you'd have.7% equity gain and a

guaranteed higher low on your equity

curve. So this is how you can move your

stop loss up as you as stuff makes

progress for you early in a trend to

guarantee a higher low on your equity

curve. So early in a cycle you need to

add total open risk to participate in a

rally but you can manage it by looking

for positive trade feedback position

sizing and adjusting stops to manage

that risk. Uh Ry, anything you want to

add on progressive exposure or kind of

the math behind guaranteeing a higher

low on your equity curve? It's it's

quite important because uh when you're

beginning, you're putting on too much

and what happens is when you put on too

much and you get that negative feedback,

it sways your equity curve way too much,

which results in bad information and you

get a lot more cautious when you're

supposed to keep pressing, right? So it

it's a it's a really important concept

especially for phase one and two

traders. Uh I think phase four uh and

later part when you're consistent it

matters a lot I would say less because

you develop a feel more than uh having a

mechanical system that works for you.

But it's super important to pay

attention to early because uh it it gets

you out right. uh if if your first few

aren't working that means you're either

in the wrong space or what you're doing

is not working or if your first few are

working you develop that confidence a

lot quicker right um this the second

thing it does is you know uh position

sizing it keeps that in check and in

line with what you can handle in terms

of risk right the main problem with

stage one two traders they're putting on

too much risk they can't handle that

risk so when they see that down you

pullback or that down day, they're not

able to handle or stomach that day and

then they make a irrational decision

when it they're just not there yet,

right? So, it it does those two things

for you and it's super important, I

would say. Yeah. And I like the comment

for Paul. Richard probably made all A's

in his uh math classes in school. Well,

I was a mechanical engineer, so I had to

had to do differential equations and

stuff like that and and Ry is even

smarter than me. So um one one other

thing I want to mention here is a lot of

top traders who I who I interview they

also use ETFs uh leverage ETFs to gain

exposure when everything is correlated

because when everything is bouncing and

starting a new uptrend a lot of stuff is

moving together and leverage ETFs can be

a great way to quickly gain exposure

when the leadership is a little bit

unclear or um you know they're not quite

at spots where you can manage risk

exactly but you know a trend is

starting. So you can use a 2x or 3x

index ETF like the TQQQ to build

exposure. So another example here, 20%

position in TQQ with a 4% stop is less

than 1% account risk. But if it makes

progress for you as the uptrend develops

and say rises 6% could which could be

honestly just one day, one good day in

the market, you could you end up having

a 1.2% equity gain which then you could

sell and finance three trades on a crowd

strike, a PLTR uh when they actually set

up spots where you can manage risk. So

this can be another good way to gain

gain that initial exposure that then you

can risk that profit to finance trades

and you know build in build into new

positions to early in an uptrend. Um

it's also really it's also a really good

way to

um I'd say use what we said in terms of

u extremes like the uh percentage stocks

above 40 MA and things of that nature.

If you really back test those really

well, index exposure initially is

usually a good way to go about it, it

keeps you, you know, uh you don't have

to pick the best stock yet because you

don't know what the best stock is going

to be at extremes, right? Um so it's a

really good way to get started and even

in the the initial, you know, this uh

this downtrend and then that rally up

12%. One of my first positions was to

actually the you know uh spy right and

getting exposure. I didn't go three

times. I went the options route which I

don't want to kind of mention here

because there will be like a ton of

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YouTube Transcript:You CAN Time the Stock Market - Here's How

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You CAN Time the Stock Market - Here's How