Hello, my name is Doug and I've been a day trader now for more than 25 years. And if there is one thing that I have ever learned about trading, it's that stupid simple always wins. The more simplistic and basic our trading strategies are, the more decisive we become.
And of course, the more decisive we are, the more money we're going to make. It's that simple. And that's why for a lot of us, the harder that we try to make trading work or the more we immerse ourselves into complex theories and strategies, the worse we get.
And if you're not consistent or confident in your trading decisions right now, chances are your trading strategy just isn't simple stupid enough. So today, I'm going to show you one of the most simplistic and primitive trading strategies you have ever seen. It's called the box theory.
And this has been my go-to trading strategy over the last two decades. And it's helped me consistently make five figure trading profits like this, this, and this almost on a daily basis. And I'm just going to give it to you.
I'm going to give you the entire strategy framework that you need to get started right now. And just so you know this works, everything I show and tell you today, I'm going to back it up with a series of live trades. And by the time the video is over, you will see in real time why stupid simple always works.
All right, so I did promise you stupid simple and primitive. I guess I better get to work and deliver on that promise, right? So here's what we're going to do.
And it doesn't matter what asset or market you're trading. It's all going to be the same. It is just a chart.
And here's what we're going to do when we begin our trading session. The first thing we want to do is box in the previous day's high and low price. Now, this is very easy to do.
You can look at a daily chart and just mark the high and low of that candle. Or you can do what I'm going to do right now, which is take the chart I'm looking at, move my eyes to the left, and box those two prices in. So, if you take a look at my chart, this black shaded area represents the previous day's action.
And all I'm going to do is I'm going to grab any kind of drawing tool that my software may have and I'm going to connect that high price with the low price that I see. And that creates my box. Now, what we need to know about this box is that the very top range of that box, the very top part of that represents the largest collective of selling that took place that day.
And that's why the instrument reversed. And down at the bottom, we have the inverse relationship. is where the largest collective of buyers took control of the chart and it bounced its way up there.
Now, here's the reason we need to know this information for our trading day because in most cases, the majority of activity that we need to know to get the answers we want to make the biggest trades we possibly can, they are going to take place at those levels. Now, once we've drawn this box to start with, here's what we want to do when the market opens that we are trading. Again, no matter where we are in the world, whatever market we're trading, this is what we're going to do with the information that we've collected from the box.
If whenever you begin your trading day or the market opens that you're trading, if prices are close to, at or above that box, do not buy at that moment in time. Don't buy yet. If the prices are there, we want to be sell side focused.
That could be engineering a short trade or just selling a position we have. But we definitely do not want to buy. The inverse relationship is down towards the bottom.
If the prices are close to, at or below that box, do not sell. Don't sell a position that you currently have or don't engineer a short trade all the way down there. Now, what I would highly recommend here, one of the most effective things about the box theory itself is we want to take a line and draw right through the center of that box.
And I would highly recommend, there's something we've been using for a very long time here, a phrase. It's called don'tdle in the middle. Now, this is specific towards the first 10 or 15 minutes of your market open.
But try your very best not to execute trades in the center of that chart. And that's for one main reason. Because you're way off the highest buyer and way off of the highest seller, your accuracy is going to be very poor over a long period of time.
This is something I was plagued with when I started is whatever pattern I was trading, wherever it developed on the chart, I just pushed the button. This is one of the biggest reasons that we are not consistent is because what we're doing is we're trading in the noise away from the premium level. So, we want to make sure we don't do that.
Now, let's go back to the chart we have. So, the next thing we want to do is take our master or monster box and let's just go ahead and extend this thing all the way out to the right side of our chart as far as we can see and start working within those levels. Now, you can take a look right here as the market opens.
The very first move is a green candle where right at the top of that box. So, let's say your hands are tied behind your back and you are forced to make a trade right here. You got to hit the button with your chin or reach out and hit it with your chin.
Based off of the information that you've obtained in this video up to this point, what would be the right choice to make? Should be obvious. You should sell, right?
So, let's kind of move this forward a little bit and take a look at what happens. You'll notice that the chart starts to fall apart. And it doesn't mean that it's a bearish chart or the world is ending.
It's just you have reached that top area also known as like a liquidity zone or resistance area. But you have reached an area where sellside side has been ultra dominant. And us as traders have to continue to assume you know until that seller gives up or that group of sellers gives up.
This thing is never going to go any higher. It's constantly going to be suppressed. Now you see that it's moved down much lower.
I want to just kind of jump ahead here and give you another quiz. Based off the information you've obtained in this video, I want you to tell me where do you think this thing is going to go? Where do you think that's headed?
I mean, it should be obvious at this point that you're going back down to the low pivot of the day. So, take a look at that. It tested the high pivot early and immediately made a beline to the low pivot.
Now, let me give you a little hint here on why this is so valuable. Because the majority of trading strategies that we're taught in the beginning have us doing this ass backwards. They have us buying up in here towards the supply into that resistance to the top of that box and they have us short selling all the way down at the bottom.
There isn't a lot of value when you do that. Now let me show you here again the power of the box. And I really really want you to see this because when you see this aggressive move that was pretty continual.
It was pretty aggressive. You're just moving one candle after the other. It looks horrible.
People are probably freaking out. traders are getting stopped. It doesn't look like a buy.
Am I correct? Like that's not something you probably have ever been trained in your mind to buy because the technical patterns that you've been taught aren't teaching it you this way. So you're like, "That's a falling knife.
Don't do that. " You you're probably told that. But take a look at what happens, right?
You get to the bottom of the range and what happens? You bounce, right? Now, the reason that you bounce is simple.
It's because the collective of buyers were still there. And what did I say earlier? You have to assume that those buyers and sellers are going to continue to show up.
And it won't be until one of those sides are dispatched can this thing truly aggressively move to the upside or downside. It's going to stay inside of that range. And you're playing that range.
Now, let's take a look at another chart. All right. So, here we have another chart.
What do we do first? We go to the previous day's high, which is right here, and we connect it with the previous day's low. We take that box, and we extend it out as far as we can see to the right.
So again, based off the knowledge you've collected up into this video, you see where the asset is trading now. And again, it doesn't matter what asset we're talking about. It's just a chart.
And charts are reflections of people and emotions. And that's why they're so universal and can work in anything that you trade. But let's get back to the point.
What do you do? Hands tied behind your back, chin out. You got to push a button.
I hope you said sell. So, let's kind of move this forward here a little bit. What happens?
No surprise. And where do you end up going? Let's take a look at this one more time.
You went straight into where? Into the low pivot at the base of the box. And again, this does not look like something you should have bought.
That's the thing, right? Traders look at that and go, "Oh my god. " But think about it in an inverse relationship.
Why would you buy that? That looked like it was going to keep on going forever, right? And that's what we don't want to do.
We don't want to chase in to those prices. And that's why we use that box because it tells us the closer we get to the box. We have to assume that the buyers that were back here at these two points over here are going to return.
And you see there is an actual pivot again. Right now, I want to move forward here and I want to show you something and move on to alternative boxes because I mentioned when the market opens, we want to construct this large box. But, you know, as I know that trading is unique.
Sometimes you're going to open up above that box, down below that box, and as the day progresses, there's going to be secondary boxes that we need to draw. So you can take any sort of pivot from any type of chart frame you're looking at and create yourself a new box. Now I personally use the box effective enough that within the first 20 to 30 minutes of the day, I can find myself a very big winning trade and I don't need to trade the rest of the day.
But I do know things happen. You work, you come home. There's there's multiple reasons you may or may not want to.
So here's what we're going to do. We're going to take this box and we're going to move it back and create secondary boxes. So, I'm going to move forward just a little bit.
And anytime you would see a pattern like this, you can take again any high and low pivot, the very first high and low pivot that you see with your eyes. We'll grab ourselves another box tool. And we're just going to take this high pivot, right?
Doesn't matter what time frame, doesn't matter what asset, and we're going to box that in and create a secondary box. Now, the rule still applies no matter where you are, where where you are on the chart. Take a look at where we are.
What do we do down here, right? You're still in that buy zone, right? Keep keep thinking about that.
And I want to make this clear because this is what's so important about it. You have to trust the process. You have to again assume the big buyer and big seller are going to continue to show up.
It there could be millions of reasons why they want to do it. It doesn't mean it's bullish or bearish. Get that in your mind.
It doesn't mean that things are going to collapse. 99% of the time you're going to have a trade trading something that's jammed within a range. Okay?
So, what would we again hands tied behind the back, chin out, you got to push a button, right? You no setup whatsoever. You just hit the button based off of the box.
You buy and look what happens. You bounce off of the box, right? That's a nice nice bounce.
Now, I want to give you one more tip. Consider this like a bonus here. One of the things that traders often misuse, a huge word that's misused in the world of trading is the word breakout or breakdown.
Just because something is rallying or moving upward aggressively does not constitute a breakout or something flushing doesn't constitute a breakdown. Again, that's why this had flushed is because it stayed within that structure. So unless this thing actually broke the low of the box or the high of the box, it it's going to stay with inside of that structure.
That's how you can trust it. Now, let's go over here to this micro box. At some point, no matter what you're trading, is going to move outside of that box.
And when you do move outside of that box, this is where the big moves tend to take place. the biggest move, the official breakouts are when ranges have been broken and that's when things really start to kick into high gear. But I want to show you this because it's very very important.
What happened? You broke the range. And once you broke the range, take a look at the aggressive move.
Now, let's go back and keep in focus the previous box. Again, I'm just going to give you another quiz, right? Where do you think that's going to go?
Where do you think? Got any ideas where that power move is going to go? Should be pretty simple.
You should have passed this test with flying collars. You're going to run right back up into that top. Now, let me show you again what has happened.
The effectiveness and the power of the box. I want you to look at the chart for a second, and I want you to think of what you're seeing here and how valuable this is. Take a look.
You come back up to the box here and revisit the very high. So if this was your you were in this scenario, this happens to you. Obviously once it's rallied up this far, you don't want to buy it.
You know, you want to be a buyer down here and again sell side up here. You want to be a sell side up here. Look, it gave you the trade again, right?
Another trade back down, rejected. Where does it go? It goes right back into the base of this box.
You see how it revisits that box, right? And where do you end up? And this is like several days of activity.
You've remained trapped in the box again. High, test the high, you don't buy. It sells, tests the low, tests the low again, trades to the top, trades back down into the bottom.
That right there was enough trades for you to kick that all day long and make tons of money. So, enough of this. Let's move on to some live trades so you can see exactly how this works in a real market.
Okay, so we're going to start out here in the pre-market and put together the premium levels and draw the box so we can begin to manufacture quality trade ideas. Now, before I get involved with that, let's just do a couple of preliminaries here so we're all on the same page. I am using the Think or Swim platform.
So those two gray areas you see is pre and postmarket and the dark black area is official market opening. Just wanted to make sure everybody understood that. Now I'm using a fiveinut chart.
These are five minute candles. But as I said earlier, I don't really care what chart frame you're using. That really is irrelevant.
I don't care what asset you're trading, whether it's a stock, a commodity, or crypto. None of that matters. Just follow this process and good trades will come your way.
Now, during my pre-market scan, the stock that was the most attractive to me today was Palunteer, ticker symbol PLTR. And that is what here is on this screen. I'll show you why I like it so much.
But let's start with the basics. We're going to go to the very previous day and we're going to mark that high and that low and create our box. And that constitutes the premium levels.
We have the extreme sell side way up here and the extreme buy side. Now, take a look at right where Palunteer is. Now, I mean, at this point in the video, you should know exactly what you're going to do.
We are looking to buy into that level. And I want to show you about trusting this process. A lot of people would say right now that is idiotic.
The market is correcting and it's down. I got the S&P right now at 55 points already. That's huge.
NASDAQ down 190. So, you would think no way do you buy. But we want to look at the very base of that box to buy.
Now, what I'm going to do here as well is I'm going to remove this entire box because the thinker swim platform isn't as stay aesthetically pleasing as Trading View. So, I don't want to clutter it up. I don't like the contrast of those colors.
So, let's just kind of mark the top of that box and let's mark the bottom of that box. Now, the reason I like to palanteer so much, let me kind of show you something here. I don't know if I touched on this, but once I draw these levels, I kind of like to push my eyes towards the left side of the chart.
And let me show you what I see here with this based price around this 85 to 8550. Notice that the previous day there was a pivot there and there also was a a little bit of support before you had this very nice sized rally. If you move it over here that price was right within this range where there was a previous pivot and if you come all the way out here you're going to see it was once a pivot again.
So there's a lot of activity. You see how that like see how the visualization if you draw that rectangle across there or the box there's a lot of activity at 85. That's where I want to buy.
So let's say it doesn't get down to 85. I'm not sure I want to buy this. If it goes way below 85, I'm still not sure I want it.
We want to see number one, does it get to 85? Number two, does somebody buy it at 85? Also, if it goes parabolic and starts shooting straight up out of the air here, do we buy it?
No, we do not. It has to be at 85. I want to make that clear because if it doesn't follow the order of the box, the answer is very simple.
We don't take the trade. So, let's let the market open. Let's see if this gives us an opportunity or if there's another stock or the market, whatever may give us another opportunity.
Okay. I want to show you something right here that's pretty important. And for those followers of the channel, I'm sure you see this as well.
Take a look at what happened. you kind of got a little bit under the box. This rectangle right here represents the bottom of that box, by the way.
And we are down here at that 85 level. But look what happened. Even though you kind of pushed through that a little bit, take a look at that wick right there.
This is one of my favorite signals. I'm going to put it up here because we potentially have a John Wick. Now, a John Wick would be an inverted I mean a regular hammer followed by a break.
So, if we kind of break through this on the next candle, that's the kind of setup I'm looking for. And I'm looking to stop below just in case it gets real ugly. Okay, so coming back.
As I said, look, a very good high probability it comes back. We are in this trade. Entry price right here is 8541.
Just a little bit late right there, but 8541 is the price entry of this trade. That is the John Wick. And I'll put that up there again for everyone to see.
Now, let's talk about using the box here. Stop is going to be below the low of the day there just so we're all on the same page with that. But let's kind of back this chart out just a little bit.
So, when it comes to the targets, we're going to use the box theory on the way back. So, we got the very tippy top part of this box that we're thinking as the ultimate target, but that's quite a distance away. And there's a lot of things that can happen from where it sits now to getting up there.
This is where the alternative boxes are going to come in. Now, I'm not going to completely draw the boxes because the contrasting of colors. So, let's just kind of put a line in there.
Somewhere about in this area here is a good target. Getting right back up to the pre-market pivot. And then we kind of want to work our way back up the scale here with each one of those levels and see if we can kind of make it up there.
So the first target is getting us back in towards the top which is 87 at least and then looking for somewhere between 8850 which is let's say this level over here. You see how you just kind of backtrack that a little bit. We'll leave him right there.
I don't want to make too much a mess of the chart and see if we can get to this one or this one ultimately or if we even stand a chance of of getting back to that one. But again, we got the buy we needed. You can see it's still holding up after about four or five minutes later.
So, all systems ago, the box theory has helped us with a quality entry. If we don't win on this trade, that's fine. It doesn't cost a lot, but we have very little invested and we can get two, three, maybe four bucks.
Let's go ahead and see what happens. All right, so the first check back here with Palunteer exactly what we wanted. Now, here's what I want to highlight.
Now that we've reached that first boxed area, we have to pay close attention to this trade to make sure it doesn't get sold off. Okay, this is not the upper part of the box. So, there's still a chance we can get way up there towards the top.
This is just the first, let's say, intermediary line. So, if there's too much rejection here, then we're going to have to just get out of the trade. At this point, the stop has been moved to a break even area.
So, we're in the money one way or the other and we're doing really well here with it. So, let's just kind of see if you know we can get a little bit more on this trade. So, I went ahead and jumped forward and obviously no words are needed.
There you see it. The box theory at its finest. Look at that bounce.
Notice that when you come up to this first box, I hope I don't make too much of a mess here, but notice it just clustered into that box. So, if you didn't get an entry down towards the bottom, there was another one right there. And the thing is, it never really sunk back down into the middle of that box or rechallenged the low.
Then what happened is it repeated that same pattern, kind of reflged again and broke right back up to the upside. And notice it was almost the identical formation here as it was here. You got really aggressive.
See what happens when you break the box or the smaller boxes? You get right aggressive. You immediately run to the very top piece of that resistance.
Then you kind of hold that framework of the box. Then you run right back up to the top. You repeat holding that framework.
And now you're just floating here towards the end. Now the day is almost over here. We're pushing much later.
So I'm going to wrap that up. But that's what I wanted you to see about the box. All right.
I'm sure you've got it. But just for the people in the back, let's do a real quick recap on what we have learned today and how we're going to use it going forward. For the box, we want to begin by marking the previous day's high and the previous day's low.
If prices are moving up at the open towards, at or above, we do not want to make the first trade out of the gate a long. We want to wait for at least a pullback before we think about doing something like that. Inverse relationship.
If we are heading towards at or below the previous day's low, we do not want to sell that position right away or worse, we do not want to short sell it. We want to try to do our best very early on until structure has been developed in our charts of trading in the center. And if we can just follow that, in most cases, as you will see, as you did see, you will be on the right side of the market.
Don't forget each week my wife and I put together a free gains guide. In that gains guide it talks about stocks like Palunteer. It has setups, chart patterns, and gives an overall market review.
And as I said, it is free. So if you're interested in that, down in the description box, you're going to find a link. Now, if you have any questions, feel free to put those down into the comments section.
And on that note, thank you very much for watching. Cheers.
