So in this video, we're going to be talking about the three bar play, what it is, and how to use it to better catch reversals. Now for a little bit of background, this is a strategy that has grown massively in popularity as of late because of the simplicity behind it. The idea is that if you can identify this pattern, you can just wake up, create this pattern, and then go back to sleep. Then the rest of your day can be spent doing things such as frolicking in the forest.

Now, this play is based off of a recognition of a reversal pattern where you have three bars that either signify a bullish trend or a bearish trend after a sustained trend in the opposite direction. With the bullish trend, do you have an igniting bar, a baby bar, and a confirmation bar. This igniting bar is the first show of price strength and this is what turns us on to the position. And when I say igniting, it needs to be igniting.

It can't just be one of those pansy bars. And then after the igniting bar, we have a baby bar which is a resting normal range bar which allows us to set a strategic stop-loss and then the last bar confirms the reversal. And the idea is that after buying in at this confirmation of the three bar pattern, we could simply write the price action up. and if it turns against us, we can get stopped out at our stop-loss identified by the bottom of that resting baby bar, that middle narrow bar.

And for the bearish trend, it's the exact opposite. We have an igniting bar in the opposite direction. We have a baby narrow range bar. Then we have a confirmation of the pattern with another down trending bar.

But the key here is that you need to make sure that this is a trend reversal if you are seeing this three bar play in a stock that is already going in the direction of ignition and that isn't going to be as valuable of an indication because it's already going in that way. if they're three more players identifying steps of a reversal, you can't reverse in the same direction that you started in, so it's not going to be as valuable. But in any case, we're going to be going through a ton of example. So if you're lost, don't even worry.

And of course we're also going to be talking about how to use the strategy in order to better boost your consistency. But I do want to start you off at one of the best ways, the best ways to boost your consistency when trading. And that is by simply hitting that ravishing mic button and also of course subscribing for more short, sweet and simplified videos on how to trade the stock market. First example: in true Zip trader fashion, we are going to be starting this off with a Biotech Play now.

KPT I was a big one from last week KPT I Ran up like an inflamed banshee on July 3rd after an FDA approval and after the original ignition, we saw the narrow baby candlestick which by the way can be flat. it doesn't have to be a opposite candlestick, you can be flat. And then we saw a pattern conformation. So taking advantage of the three bar play, we'd set our stop loss at the low of the baby bar and take a position upon price strength with this pattern conformation bar.

And then we could simply write the price action up. Now this is really the simplicity of the Three More Play, but the issue later becomes getting out And for me I've always been an advocate of using indicators to measure price weakness. Turning on our indicators, we can see that buying in upon the three bar ploy would have allowed us to ride the price action up and then sell out upon validation, which in this case is the first candlestick crossing our short term blue SMA line. But I don't live under a rock and I understand that many of the proponents of the three bar play are a huge indicator users.

but on Zip trader I've always been a big believer in having a concrete plan with a concrete exit point that takes into consideration all of your elevating and deprecating factors so that you can kind of make a in-context decision on where is the best point for you to get out when you have the lowest probability of continuing to make more profits. But there is the sort of mantra in many trading communities that indicators are useless and you are better off just looking for price action. patterns like this play: I Know this is a very popular opinion In fact every time I make a video where I focus on an indicator that I use such as the RSI or the SMA lines, someone will comment on my video saying Charlie The Horror site does not give you an edge. You're stupid.

If it did, everybody would be using it. But that misses the whole point Because indicators aren't there to give you an edge, they're there to give you a different way of looking at the price action. So saying that indicators don't give you an edge is sort of like saying price action doesn't give you an edge. and if you believe that price action doesn't give you an edge to trade in price action, then why are you even trading? But again, with that being said, there are tons of people who use different indicators than I do that use no indicators that use a lot more indicators and they're still profitable.

I'm just trying to make the point that it's not so much which indicators you use but how you use them and sort of the value that you see in them. But I do want to caution you from this sort of logic. much like many cars to get from point A to point B have differently configured engines. Many traders have differently configured trading styles, so my suggestion is always do what works for you and hone in on your strategies.

But of course, as you know, in my personal trading style, I tend to use a system of elevating factors which are largely comprised of various indicators to push us in the right direction. and it also has to do a lot with upward versus downward potential using support and resistance, which is pretty much the most basic trading recognition skill that there is. Okay, so what about CGC Well, we have an ignition bar and open, we have a baby bar and then we have a pattern confirmation bar. So buying in upon pattern confirmation and setting a stop-loss the bottom bar would have allowed us to write the price action up and sell out at our validation exit point.

And this was a pretty cookie cutter example of the three bar play. Okay, so the next example that I'm going to be giving you is one that was submitted to me via the zip trader circle Facebook Group by the way. I love it when people send me their trades with everything worked up like this because then I could see exactly what their thought process was and this shows me what people are doing wrong. So I could figure out what to highlight in my videos.

But basically this individual was able to acknowledge a news catalyst play ahead of time and watched for elevating signs of price action that he could take advantage of. He identified elevating factors and deprecating factors. For example, he found that we had a news catalyst good volume strength on the MACD and displayed the three bar play. These are all great elevating factors, but he also made note that we did have one deprecating factor which is that we were overbought intraday.

So anyways, he made the judgment call that the three bar point and the other elevating factors made this a worthwhile position despite the one deprecated factor which was again that it was over bought on the RSI. So with this in mind, you would have been justified taking a position upon confirmation of the three bar play as well as earlier upon confirmation over our short-term SMA line. But let's say that you took a position upon confirmation of the three bar play. This would allow you to write the price strength up over or SMA line and sell out at what he called a strong exit point upon that first candlestick holding below the validation line.

Now in this picture, he is easy in our validation line, which is the more conservative estimate that I've talked about and in this case, trading more conservatively led to more profits. Just because you're trading conservatively doesn't mean you're going to have profits a lot of times. It means you're going to protect the profits that you've already made if you were trading more aggressively and we're using me break below our short-term SMA line as an exit point, you would have eaten away some of your gains here. So this was a well played position that took into consideration not just the three bar play, but also the other elevating factors as well, which allowed him to write the price strikes up and over the SMA line.

The one thing that I would say though about this is that the three bar play here was more of an indication of a field reversal than it was an actual reversal. You see, we had already had a sustained uptrend and then only a few red candle sticks before we had a green one and a uniting bar. So while this wasn't a completely pure three bar play, it was still an elevating factor that helped find better entry points for this individual. And this is fine as long as you know that some three bar plays are going to be more important than others.

Just like regular confirmations over SMA line, they're not all created equal. Entry points are not all created equal. They're going to have different elevating and deprecating factors, and each factor is going to be stronger or weaker. that's compared to different setups.

So as long as you're able to acknowledge this, then you're ahead of the game. But anyways, if you have any play that you'd like to share with us, or you like to figure out what you did wrong with, you can join the zip trader circle Facebook group and tag me in the post. and if you mark it up like this I'll respond with what you did wrong or what you could have done better and also thank you Robbie if you got a chance to watch this video I appreciate you sending this in and of course good job on the play. Okay, so what about the Bearish Three Bar Play? Well, urg opened low.

We had an igniting bar, a baby bar, and then a confirmation bar that broke previous support that allows us to set a stop loss at the highs of the baby bar and short the position at the confirmation of the three bar play. and then we can write the price weakness down and close out or cover up validation. And that's how the Bearish Three Bar play works. Okay, what about Triple Q Was this area here an example of a bearish three bar ploy? Triple Q had a bearish igniting bar, but the baby bar was way too large.

This is not a baby bar by any stretch of the imagination and as a rule of thumb, you don't want to adopt fat babies. And while this position would have worked, this was not an example of a three board play or confirmation candlestick opened higher than our baby bar. So this was not a confirmation candlestick. So how would we have timed this entry well simply by shorting upon a break of price direction? an acknowledgment of price weakness below our SMA line.

So while this wouldn't have been a three-bar play, identifying this break of price direction would have allowed you to profit off. the downside. Great Now for some action based learning. So looking at Roku, see if you could take five seconds to identify a point of entry where we have the three bar play and the elevating factors in our favor.

Well, this is sort of a trick question because there were actually two three bar plays here. The first three bar play was this bearish pattern. We had a red igniting bar, a baby bar, and then a confirmation bar. and then Boom.

We got weaker and weaker, even breaking past our directional SMA line. And the second three bar play was bullish. Right at the end of this trend downwards, we had an ideal three bar setup with a green igniting bar, a red baby bar, and then a green confirmation bar. Now here's the second question for each of these plagues, which is the point at which you should set your stop loss I'll give you another five seconds.

Well, for the bearish play, you should set it at the top of the baby bar. It's at the top because when you are taking a bearish position, the more the stock price increases, the more money you lose. Thus, you don't want to expose yourself to more risk. then is absolutely necessary for the three-bar play and that's why you set it to that level of resistance designated by the baby bar.

Now for the bullish position, you should set it to the bottom of the baby bar. This is the same logic, but in Reverse Since you are trading off of the three bar play, you want to set a stop loss at the bottom of the baby bar as that is the level of support. Okay, well I hope you got these answers I Encourage you to go out and practice these techniques using a paper trading or back-testing platform until you get them down perfectly. If you took part in this exercise and you are an active learner, let me know in the comment section below.

I'm also curious as to how many of you got this correct so that I can know whether or not I'm providing enough value with these videos. Well anyways, folks I Hope this video was useful if you have any questions or comments or concerns or whatever comment below or join our free Facebook group zip, crate or circle. never feel like you need to trade alone. If you do need help, just reach out to us on the zero to circle Facebook group.

We have a whole community there that is just more than happy to help you. And of course it's a free Facebook group so might as well check it out. We also have a discord chat, a trading tutorials, playlist and what else do we have? Oh we also have that ravishing like button But anyways, have a great day folks and I'll see you in the next video.