A trader explains why the "first red day" setup fails when traders ignore context like how many green days came before it and how big the move was. He says strict entry rules based on run length and extension size have made him over $3 million, while sloppy entries on weak red days destroy edge.
I kind of hate the name the first red day because it comes off too self explanatory where they'll think oh, just the first red day. Like duh. But what if back to what if it has two green days? Well, what if we do do this right and, but this is only a, you know, 60% move, right from here to here. I can't tell you how many traders will then get a red day here and they're like, oh, the first red day. And yeah, objectively you're not wrong. It is the first red day in a three day run. But it's not the first red day set up that's made me over $3 million because more times very similar to like the one green day runs that I don't know what happens after. There's so many, yeah, I'm drawing it nice how it looks here. But this could be like this. This could just kind of be like a crappy red day or a crappy green day that turn, you know, that may gap down but then actually run higher. So so many traders will give these, you know, setups that kind of almost meet the criteria. They just look at the two red days, they don't look at the extension or two green days, they don't look at the extension and they'll give it a shot. And it's going to end up in this realm of edge or profitability because this isn't meet the actual criteria that at least I have.
