The "Box Theory" is presented as a simple yet highly effective trading strategy that identifies strong buy and sell zones based on previous day's high and low prices, guiding traders to capitalize on probable market movements.
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Here's the deal. Today, I'm going to
show you a trading strategy that I would
use right now in this market. If I
wanted to start making $1,000 every
single day, even if I was starting out
with zero experience or I had nothing
but frustration to show for my efforts,
this right here would be the strategy I
would go to right now. Now, for a lot of
you, you're probably thinking, "Man, a
strategy like that with that type of
performance, it's got to be complicated.
I'm going to have to spend years trying
to master this thing." Guess what? You
don't have to do any of this because not
only has this strategy helped me become
a 7figure trader, I've had the benefit
of teaching this to so many people from
around the world. Many people who
started with zero experience, many
people who had blown through accounts
and had nothing but frustration to show
for their efforts. I've seen these
people flip the script and become
[music] successful traders using this
strategy. Now, the strategy I want to
talk to you guys about today is called
the box theory. And I truly believe this
is the most simplistic yet effective
trading strategy you're ever going to
see. In fact, since I started posting on
this channel about the box theory over a
year and a half ago, it has become
[music] one of the most widely viewed
trading strategies on the internet. And
don't take my word for it. Just read the
comments. Nothing but simple, stupid,
and effective. So today, what I'm going
to do is show you everything that I've
learned about this box theory over a two
decade trading career. And I'm going to
share with you today many things that I
have not shared in the past videos. And
as always, towards the end of the video,
I'm going to show you a series of live
trades using nothing but this box,
putting those final pieces of the puzzle
together for you. That way, when this
video is over, you can honestly look at
yourself and say, "Man, this thing is
stupid simple and effective." So, let's
go ahead and get started today.
So, here's where we need to start out
with the box today. First and foremost,
we need to make sure that the box is
drawn correctly. Otherwise, all the
data, all the analysis that you get is
going to be slightly off. And nobody
wants to be slightly off. Now, the basic
premise that goes behind the box is a
very simple one. Where we want to start
is by connecting the previous day's high
price point with the previous day's low
price point. And let me show you a
couple of ways to do that. Starting with
the most simplistic, take whatever chart
you are trading. So, for today's
example, I'll be using the stock Apple,
APL. But I don't care what's up here.
Could be anything. But what does matter
is take that asset you're trading, move
it over to a daily chart. Once you've
done that, all you need to do from there
is grab yourself some sort of drawing
tool like Trading View has a box tool
already. Go to the very highest price
point. Highest price point meaning the
highest point you can see with your
eyes, wick included, and connect that
with the lowest price point. Just like
that. And that creates the essence of
your box. Now once you have done that,
you can grab some sort of line or other
drawing tool and put a line right in the
center of that box. Now it doesn't have
to be perfect. Just you know eyeball it.
Whatever is close just like that.
Doesn't even have to be a clean looking
box. Just so you get that box drawn.
Previous days high, previous days low
line in the middle. Now after this you
can switch to a smaller time frame that
you like. So, for example, today I'll be
using my favorite time frame, which is a
five minute, but it doesn't matter what
you're on. That's the beauty of the box.
It'll work on a 1 minute, 5 minute, 1
hour, 30 minutes. It doesn't matter
because the analysis is always going to
be the same. Now, once this box has been
drawn, we can now talk about the
relevance and what this box means. And
the box has three main components to it.
The top part, the bottom part, and the
center part. And let's go over what each
one means. Starting with the very top
part of this box. The very top part of
the box represents the strongest
sellside force. Hence the reason why the
asset had rejected from that price and
sold off aggressively. So easy in
layman's terms. The largest, strongest,
most powerful well-funded seller is
located up here towards the top of the
box. The very bottom of the box
represents the strongest buyside force
or liquidity. Right? Hence the reason
why the stock bounced from there. So the
very top parts of the box represent the
strongest seller. The bottom part of the
box represents the strongest buyer. And
the center of the chart right here
represents nothing at all. It's just
noise, confusion, and indecision. Okay,
that's the essence of the box. So real
quickly, at the top of the box,
strongest seller, bottom of the box,
strongest buyer. center of the box.
Nothing. Okay. Now, with this
information, we can move on to how do
you actually generate a trade from this.
And this is what I love so much about
the box. This is what so many other
people love about the box, and that's
its simplicity. Because there's only
three basic rules to getting this thing
right. And here they are, beginning with
rule number one. If the asset that you
are trading is close to, at, or above
the top of the box, don't buy it. That's
it. just don't buy it at that moment in
time. And the reason for that is what
the top of that box represents the
strongest most wellfunded sellside
dominance. So ask yourself a very simple
question. Why would you want to buy into
a known area that the majority of the
market can clearly see? A seller that
has announced their intentions. Why
would you want to walk into the lion's
den and go head-to-head against a known
large seller? You're going to get
cheesed every time. Rule number two, if
the asset you're trading is close to at
or below the bottom of the box, don't
sell it. Simple, right? Just don't sell
it for the same reasons you wouldn't buy
at the top. The known largest collective
of buyside wellfunded power is located
down there. Again, ask yourself the
question, why do you want to go into the
lion's den? Why do you want to position
yourself to the sell side, right next to
the largest, most wellfunded and
transparent buyer? You're going to get
cheese down there, too. Rule number
three is the center line. This is what
we call do not didd in the middle. And
it's self-explanatory. Just simply don't
trade there. Just don't do it. And
here's why. Because at the top of this
chart, you know, odds are it's going to
be sold. There's probably an 80%
probability that that strong seller will
return. At the bottom of the chart,
there's probably an 80% probability that
the buyer will in fact return. These are
known data points for the market. In the
center, you don't have that information.
So, if you think of it this way, it's
possible if done right, you could have a
70 to 80% win rate at the top of the
box, a 70 to 80% weight at the bottom of
the box, but 50/50 in the middle. You're
going to get confusing, whipsolled, poor
action, and the risk and reward is not
in your favor. Now, I know a lot of you
that are watching this that have a tiny
bit of trading experience is going, you
know what? I've seen some of these
stocks just shoot right up through the
box. I've seen a bunch of these just go
right down, just blow through the box.
What do I do then? I've seen these
things hang around the middle and just
move all over and it just take off up or
down. You know what? I've seen a monkey
ride a bicycle before. But you know what
I haven't seen? I haven't seen a lot of
monkeys riding a bicycle. The key to
being a successful professional trader
is trading probabilities, not
perfection. And over the course of time,
you've got to go with what is most
likely outcome in every scenario. >> [snorts]
>> [snorts]
>> And if you're always selling with the
big seller and always buying with the
big buyer and blocking yourself out from
the garbage little breadcrumb scalping,
you're going to go a long way in this
trading business. Nothing will ever be
perfect, but you're going to be a winner
more than you are a loser. Now, this is
all great the way I'm talking it up, but
how about we put this theory to the test
by showing you some real life trades so
you'll learn to trust the power of the
box. So, let's go back to our Apple
chart. You'll see our box is still
drawn. And I want to move to the
previous days open right here and focus
on the very first candle. I'm going to
give you a quiz. This should be a layup
for everyone. But tell me, your hands
are tied behind your back. You're forced
to make a trade. Based off the
information you've collected in this
video, what would you do here? Buy or
sell? Now, hopefully you said sell
because the price of Apple is close to
the top of that box. Now, you might have
been hesitant about saying that because
you see this big green candle and it
looks like that's going to be a
breakout, right? That's the trap. It
looks like it's going to be a breakout.
What kind of fool would short a bar that
looks like that or sell it? Why would
you sell something like that? Well, I'll
tell you why you would sell something.
because we know the largest, most
well-funded known seller is located
there. And what happens? Couple of bars
forward and look smoked. You will get
cheesed every time walking into it. And
for some of you, you've had this very
feeling. And I have too. Now, let me
give you quiz number two here. Where is
it now? You see it here. Is it closer to
the bottom of the box or the top of the
box? The bottom. So, what should you be
thinking again? Hands tied behind your
back, forced to make a trade. What
button do you hit? Buy button, sell
button. It's the buy button. And just
like the previous candle, I know that
didn't look like a sell, but it was. And
I know this doesn't look like a buy, but
I bet that it is. Why? Because you're
now bordering the strongest, most
well-funded, and known transparent
buyer. So, if I just kind of fast
forward this a little bit right here,
you're going to see that's exactly what
happens. It tags the very bottom of that
box and finds a way to move back up into
the center of that range. So, again,
just look at it. You traded from the
very top part of the box. The known
seller came back into the market. You
tested the bottom of the box and it came
right back into the known buyer and then
bounces back up. The key to learning
this and starting with the very best and
most powerful part of the box is it's
also a way to keep you out of trouble to
keep you from walking into the market's
traps. Now, a lot of you might say,
"Well, look, you're cherry-picking some
charts. This doesn't work all the time
or it only works in a certain market."
But let me go ahead and show you what
the next day's action looks like. So, I
went ahead and jump forward to save time
into the next day's action. And what
we're going to do is just scoot our box
over here. Right? And for that day, we
had just a little bit lower price print
right there. So that is our new drawn
box. So again, I want to go back and I
want to just cover the basics. Remember,
keep it simple. So here it is. Apple is
opening up. You tell me where it is. Is
it at the top or is it the bottom? It's
at the bottom. Again, I know this looks
bearish. It looks like a sell. It looks
like it's going to collapse. But by now,
you should know the rules. You tell me
again. Hands behind your back. You got
to make a trade right now. Buy button,
sell button. Which is it? Hopefully by
now you said buy. If you didn't, you're
going to have to rewind the video. What
do you think happens here? Right. Goes
right back up through the top of the
box. Now notice though when you get to
the top of the box even though you
extended slightly what happened it was
never able to hold that momentum over
top of the box. So again you can see
span through several days of activity
it's always managed to test the very top
of the box and the bottom of the box so
quickly as prices get towards the top of
the box we are sell side focused bottom
of the box we are buy side focused. in
the middle. We should do our best to
stay out of that because our accuracy
isn't going to be as good. So, now we're
going to move on to the next part of
drawing boxes, which is alternative
boxes. You're going to need to know this
because I'm sure some of you have this
question right now. What do you do in
those cases when price breaks the box?
When you wake up and the price is way,
way above the previous day's high or way
below the previous day's low. So, I'm
going to show you a couple of ways to
draw some alternative boxes. That way,
you can still continue to use the box
theory. Starting with gap up and gap
downs and how we draw these alternative
boxes. Now to save time, I went ahead
and drew the box from the previous day
connecting the previous day's high with
the previous day's low. I moved that box
into the regular session. And as you can
see now, the ES is trading far above the
previous day's high. In this case, we
need to create new levels and new boxes.
And here's how you do that. When in
doubt, the cheat code for the box is at
any given time, you can always connect
the very highest price point you see
with the lowest price point you see.
That would be right here with the lowest
price point you see. And that creates
your alternative box. So whether it's at
the beginning of the day, the middle of
the day, the end of the day, you can
always create, let's call it, cheater
box and use those levels. And here's why
this is so beautiful. Continuing to
hammer home the power of the box theory.
Because regardless of where that box has
been drawn, the three rules still
remain. You are a seller at the top, a
buyer at the bottom, and you're not
trading in the middle. So, having known
this information, going as far as we
have with this video, while this has
gapped up and it's looks stupid,
what do you think is the odds play here?
You got to push a button. Is it a buy
button? Is it a sell button? You tell
me. I hope you said sell because what
happens is down it goes. Right. And
there it is. Right. Moves down towards
the very base of that box. So here's
what I want to show you though that you
probably don't see too many times on
YouTube videos, but this is very very
important. This goes in in in tandem
with understanding and believing your
technical analysis and understanding the
strategy. First and foremost, just like
the rest of them, it didn't look like a
sell when it was supposed to be a sell.
It doesn't look like a buy when it's
supposed to be a buy. But notice on this
one, it tapped the box and this sneaky
little thing tried to come back up
there. Just try to throw that last
little shade of doubt into the trader's
head. Then it eventually cracks. It
eventually cracks and rolls over because
the largest seller was always there. and
that largest seller would always win out
as the all as the buyer would always win
out. Now, what we're going to do at this
point is I'm going to show you a couple
of live trades using nothing but this
box theory in its simplistic form, which
is selling at the top of the box, buying
at the bottom of the box, and staying
out of the middle. These are recent
trades we took in our live community
that we're running every day. And as I
said, 26 years into this game, I'm still
using the box theory every day. So,
let's take a look at a couple of those
trades. Now, as we go through these live
trades that we made in the community,
I'm going to pick these things apart,
but I just want you to simplify your
focus and think about those three rules.
We are sellers at the top of the box. We
are buyers at the bottom of the box. And
we're just not going to doodle in the
middle, right? Let's just keep it
simple. No indicators, no fancy
candlesticks, no jargon. Let's just keep
it stupid simple. So, let's go through
this YM trade. First and foremost,
drawing the box. So what we do is we
connect the previous day's high with the
previous day's low and we extend that
out right towards the market open.
Right? Very simple. Now knowing what you
know up to this point in this video, it
should be a slam dunk easy peasy answer.
What do you do here? What do you do
here? I mean look where it's at. It's at
the bottom of the box. So while it may
look like a market crash, a super dump,
this is a buy. It's a buy because you
are against a known buyer. And let me
show you what I mean by known. If we go
back and we take a look at this chart,
this buyer was tested once, twice, three
times, four times, and now a fifth time.
So, are you going to tell me that on the
fifth time the buyer is just not going
to show back up? They've been tested.
They've been proven. You're at the
bottom of the box. So, let's go ahead
and open this up and let's see what
happens. Now, as I play this forward,
I'm just going to go one more bar
forward and you'll see we start out with
this very, very nice green. Now, this is
not an entry class or every little
minute detail. But in this case, all I
look for is just one little line of
support and that's enough to go in
because as I said in so many of my other
videos, especially like the unsharp, the
earlier you can get in with the signal,
the less your risk is. So the beautiful
thing about the box is a stop loss goes
right underneath of the low. So the ones
that you do lose on the 15 the 20% that
you lose on the losses are going to be
so much smaller. But here's the beauty.
The risk versus reward is nuts because
the target price is either the center or
the middle of the box. So everything
that you are trading has maximum range.
So if we kind of move this forward,
you'll see what happens is it shoots
right up into that level, right? And
gets rejected. Now take a look at the
rejection. Where did it come from? It
came towards the top of the box. Now
this one was a little shy of the top,
but as you get towards the top of the
box, the philosophy here is you can't
start buying on this candle. You have to
buy on this candle bare minimum that one
at the latest. You cannot start chasing
into those momentum like mo most
strategies do. Now that we have gone
lower, what is most likely going to
happen? Now, I'm going to go ahead and
hit the sell button because that's what
you should be doing here. You should be
looking to sell a position like that off
of the top. Now, in this case, the fill
on this platform is going to be way
later. It should have been right there
at the break of that candle. Stop loss
should be over top of the high of that
candle. target price is moving back
towards the bottom of the box. Okay.
Now, this is a little bit late of a
fill, so it won't be 100% accurate, but
you'll get the message because what
happens is you come back down towards
the bottom of the box. Right now, if we
stop right here where we are, and I just
continue to move this box out, where are
we? We're now slightly below. Now, one
thing to understand about the tops and
the bottoms is we're just talking about
zones. As we get close to, our mind
should shift to selling. As we get close
to, our mind should shift to buying. So,
what we're looking for in this case is a
buy because we are underneath the box.
Now, we do need the candle signal just
to take out the top. So, let's go move
it forward and see what happens. And you
kind of move up. Right there is good
enough. We're going to go ahead and hit
the buy button again. It's almost the
same trade as it was before. targeting
back towards the middle of the range or
even higher, right? And you'll see what
happens is it comes back up again,
right? But notice the pattern over and
over again. Testing the biggest seller,
testing the biggest buyer, returning to
the center of the charts. It constantly
has this momentum over and over and over
again. And you can see using no other
candlesticks, no other theories, no
things that take you 19 million hours to
figure it out, you can actually put some
pretty damn good trades together. You
will be pretty consistent by using this
type of a formula and just those three
rules. So guys, I'm going to end the
video there. It's been my pleasure to
talk about my favorite trading strategy,
which is the box theory. I hope you can
agree with so many others that this is
the stupid simple strategy of a
lifetime. And if you just follow those
three basic principles of being a seller
towards the top, a buyer towards the
bottom, and staying out of the middle,
you should be able to put together some
very nice quality trades. Now, one last
thing I want to remind you of before I
sign off is if you want to see these
types of trades in real time, every day
we trade live in our new squad trading
room. My wife and I just put this thing
together. We've had a great time trading
live. We're going to continue to do this
in front of everybody. So, if you're
looking for a more tailored experience
where you get exactly what you see on
this screen, live navigation, live
trading on screen with narration every
day. No Discord hindsight stuff. Just
real life, real world stuff. Click the
link below or follow the link below in
the description box. That'll take you to
our squad. So, on that note, guys, it's
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