If You Only Watch One Trading Strategy Video, Make It This

It is the story of $27,000 to now over $50 million. This year alone, he's had, that he's shared on X, a $7 million trade, close to $10 million trade.

And that trade, I made about $1.5 million just in 15 minutes. So short selling has to be very precise or you are taking huge amount of risk and potential to lose more than 100%. If you don't avoid, first red day will become first losing day.

Because he has made $50 million from just $27,000. Introducing Steven Duff.

Now this process is very important because once you have simulated how much money you can make end of the year when you are trading every day, that eliminates your emotion from being FOMO.

Because in this episode, Steven breaks down the exact statistics that he has built around 3 of his trading models. He shares those exact models with us step by step so that you can implement them into your own trading.

This is where back in the days I was trying to dig how to really precisely capture the top. I have sectioned initial market cap. So you kind of have to look into other people's mindset. It's the big larger players because it's much larger market cap. Ideally that for hedge funds, you do not want to push more than—

Stephen then shares exact trade examples using this methodology that has made him tens of millions of dollars in 2025 alone.

If you want to be consistent profitable, test the strategy by yourself first.

Make sure that whenever you are designing a strategy, it's fundamentally tied to either Welcome everyone back to Chart Fanatics, the go-to channel for all of the very best strategy and concept breakdowns in the world with some of the very best traders in the world as well. Talking of which, we have a phenomenal trader. We had him on Words of Wisdom earlier this year and we were very blessed to do so, and the episode did absolutely incredibly. YouTube even tried to hinder our progress because of how great the results are. It is The story of $27,000 to now over $50 million. This year alone, he's had, that he's shared on X anyway, a $7 million trade, a close to $10 million trade. You already know who it is because there's not many traders who can do such a performance. It's the one and only Stephen Dux. Hello, guys. Thanks for being here, Stephen. Honestly, it's a true honor to have you back, and I've been super excited all year to get you here on Chart Fanatics. And today we're going to go through some strategies of yours. And yeah, I guess just hand it straight over to you. Where should we begin?

Okay. All right. So today I would like to cover maybe about 2 to 3 because some of the concepts are combined. I will start to approach of how I really build my strategy and why fundamentally it works. And yeah, let's get started. Perfect. All right, guys. So the first strategy will be gap up short. Second strategy will be bounce short. Third strategy, it's what people commonly call the first red day, but this strategy is very strict in terms of criteria. So to be able to increase its winning percentage, you have to really be selective, and there's many situations that it won't work. So I will approach it by statistics, volume, and also share price matter as well.

So, uh, all those strategies only—

first of all, only works on small caps. So let's start with the very first criteria. The initial market cap has to be between $1 to 100 million. This is the market cap. Second criteria will be the float. The float has to be anywhere between, um, 1 million to 50 million. Now there are specific sections between it. Um, 1 million to 2 million is considered to be very low float. $2 million to $5 million is considered to be mid-float. Now $5 million to $10 million considered to be large float. Now typically when we're running into something around $10 million to $20 million, we don't run into these type of play that much. So, but the strategy also works as well.

So let's start with the very first.

Gap up short. The reason why we call it gap up short is in the morning we see a stock typically gaps over 100%, 70%, sometimes even 1,000%. So the very first thing you want to approach is select by the market cap. If the market cap is over $200 million, then it's not doable. It has to be under 100 million market cap. Uh, the second one, look at the float. If the float is over, uh, 50 million, majority of the time, 99% of the time, it's not really tradable. So make sure to filter that one out as well. The third, and then we have to take a look at the volume. So, um, whenever there's volume sections, So it's between 1 to 10 million and 10 to 20 million. 20 million to 40 million is still tradable. When pre-market volume exceeds over 50 million, that's where you have to pay attention. Because if in the pre-market trades over 50 million, that means after market open, we're going to trade more volume because people are interested. Then the typical ratio is around 1:5 to 1:10. So if the pre-market volume trades around $50 million, you are estimating the entire day volume trades around $500 million. So if $500 million is going to be really crowded into a market cap that's only under $100 million, you know it's going to be very difficult. There's going to be a lot of algos playing games, and it's very difficult for a short strategy to work. Now, majority of the time volume concentrates between 9:30 after market open to 11:30. So if we see a mass consolidation, maybe there is a way to short in the afternoon because volume dies out and most of the volume that people traded are in the morning. Soon as something cracks, there's more people are stuck on the top. And it will cause a chain reaction for stock to drop. So this is something to pay attention. Then the third thing is we have to pay attention to— this is when the market— before market opens. So we have to pay attention to its sectors.

There's 3 sectors.

There's about 2 sectors you cannot trade. First of all is biotechs. Biotech is very different. I have tracked countless statistics by using gap-up short to treat biotech. The winning percentage drops by about 20 to 30%. So that's something I tend to avoid. Every time when I see a gap-up short on the scanner, I delete that. I don't want to see it because I have traded now, I have traded biotechs for many, many years, have probably traded about 300 to 500 tickers. The net profit of biotechs probably maybe around $1 to $2 million on 500 tickers. So it takes a lot of mental energy. It's just not worth it. So it's biotechs. It's— it messes with the winning percentage. The second one is the energy sector. Okay, make sure to avoid that sector as well. So those two are very important. That doesn't work on gap up short, down short, and ideally first red day. So now if it's really over—

all three, all three of these, yep, you would look to avoid.

If it's really overextended, let's say something goes up to from 1 to 1,000, now maybe that's something to consider, but majority of the time on something around 200-300%, maybe even under 500%, avoid it. And oh, there's another one I forgot about, the Chinese stocks.

Okay.

This one you have to tend to avoid because whenever on the intraday volume, if you trade less than 30 million, I've seen tickers get halted and it's really thin. The volume on the level 2 seems really thin. And as soon as you get halted, I've seen tickers go from 2 to 200 and there's no way for people to get out and people are taking significant losses on it. I personally took about 2 or 3, I think it's maybe 5 in the course of my lifetime and trading lifetime. And it's not pleasant. So I have managed to avoid from going from 2 to 200, but I have taken maybe from 20 to 30. I made like 100% loss because there's no way to get out.

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You mentioned in terms of statistics, just in terms of like creating this criteria, how does that look for you? Is that like an automated process of collecting statistics, or are you Essentially putting in the criteria of market cap and the float and the volume and then looking at the particular tickers and setups and then seeing how they performed and then creating like the win percentage and seeing what works, what doesn't.

It's not automated. I have tracked down by hand pretty much around 20, starting from 2015. So it's almost 10 years. And every day when I see something, I'll put in I'll put it in my spreadsheets. And because for its market cap, float, pushing percentages, volume on the day, and also selecting them by sectors, after countless amount of hours, I have figured out a criteria of how to really approach to the best gap-up short.

And this is what allows you to— so just to be clear then as well, these rules that we're covering here, is this just for the gap-up short? Is this across All three across all three.

Perfect. So first, except for this one, this one can first red day market cap can go above up to $200 million.

Got you.

Over the night, it's probably not ideal. Okay, so the second thing, just in terms of statistics, the reason why I'm giving you this criteria and how I really approach to the statistics. First of all, I track the frequency of how many times it happened per year. So Gap Up Short happens now after taking out all those biotech, energy, China play. There's about 50 times a year, 50 to 70 times happens a year.

Gotcha.

Winning percentage is about 75% or plus, sometimes even higher. Then I track down the reward. What's their average fading percentage. So if I'm shorting, the average goes down about 26% from the intraday high. So I'm calculating the reward. So the very first one is I know how many times they happen per year. I know what's my winning percentage. So if let's say average happens around 70, so 70 times a year, I'm winning about close to 50 50 of them on the year.

Gotcha.

And each year and each sample I'm winning 26%.

Okay.

So I will know that how much money I'm going to make throughout the end of the year. Now, this process is very important because once you have simulated how much money you can make end of the year, when you are trading every day, it eliminates your emotion from being FOMO because you know, okay, Well, I just wait for the year. This is how much money I'm likely to make.

And is this what you were saying in the podcast when you were saying what you do is you compare to what your perfect result should be?

Yeah.

And as long as you're trying to get close to that or you're on track, that's all that matters.

Correct. Yes. So of course there's some human error that sometimes ticker goes not the way you think and you have cut losses and all of a sudden the stock goes back down again. So you have to try to adapt to the market by using statistics and using both to make sure that you are trying to approach the best statistics possible. So that's the reason how I do it. And it's been working out pretty well.

This day here is the gap short, right?

Yeah. Okay, so, um, now let's go into aftermarket open. Once we have filtered out the float, market cap, volume, and sectors, let's go into aftermarket open. So first of all, we want to track— we want to know that how much volume traded in the pre-market. So let's say assume today traded 10 million shares in the pre-market, and I'm estimating today is going to trade between 50 million shares to 100 million shares throughout the day. Uh, now by statistics, majority of the volume concentrates between 9:30 to 11:30, and almost about 30 to 35% of the volume on the day trades before 11. So volume concentrates in a very short period of time, and after 11, volume tends to get slow. And we want to have as much as emotional trades in the morning for other people, of course. So we want to track down the average pushing percentage. So after market open, usually when stock becomes really hot, there's people wants to chase right at the open. Of course, I was going to cover the, the historical chart, but we're only focused on intraday here. So ideally, we want to look between 20% pushing percentage to 35% pushing percentage. Now, the higher the percent, the better the winning percentage is. And now here we have to section, uh, separate them by float. So typically when we're around into between 1 million to 2 million, the average percentage, the percent of pushing percentage becomes much higher because it's low float and high demand, of course, pushes the stock much higher. So I have tracked down between 1 to 2 million average pushing percentages between 30% to 35%. After that, the stock tends to consolidate. Once they consolidate for 1 hour, that's where I typically start to size in. And between about 10 to 11, the stock shows the first weaknesses on the breakdown. That's where I add a full position, risking this consolidation.

Okay, so your risk will be— your stop loss will be above that high?

Correct. So now if you are running into something between 5 to 10 million and pushed about 20% to 25%, that's in the average. Mm-hmm. Then of course, using the same method, uh, wait until 11, start a partial position, and after the momentum shifts, uh, maybe cracks about 5% to 3%, size in full position, risk the consolidation. The average risk on the trade is around 7%. The average fading percentage is around 26%. Of course, you're sizing a little bit below, so you're looking at 25% to 24%. So your risk reward is between 1 to 4, no, 1 to 3.5.

Here we go. So you're looking at entry here for the full-size position.

Correct.

And stop loss above the consolidation.

Consolidations, yes.

And then in terms of the criteria, is there a particular percentage on the way up the upside that you want to see?

Oh, yes. The gap up short, yeah, for that. I forgot about covering this. Don't forget. It has to be above 100%.

Got you.

Okay.

Yeah. So above 100%, you want to see that spike in the market open, see that volume as well.

Yeah.

And then you want to see it consolidate. And once you start to see that first initial breakdown after that consolidation is where you can then look to enter your position, stop loss above the high, and then you're looking for a breakdown of 20% to 35%.

Correct. And the volume has to be matched as well. So let's say the pre-market volume is 10 million. I'm estimating $100 million throughout the day.

Got you.

And before 11, it traded 30% of the estimated volume.

Okay, got you.

So all the criteria has to line up together for me to take entry.

Got you. Perfect. So that's the gap up short.

That's gap up short, yes.

And then next we have, is it a bounce short, is it? Yes.

Next is a bounce short, yes.

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Let's get back to the episode.

It was amazing to see in terms of not just you know, just the layout of the trade and here's entry, here's— it's actually statistics and specifics in terms of why we need each of these criteria to then create a higher probable trade.

Correct.

Um, and you see that— would you say a lot of traders miss that element of actually working out, okay, how if this criteria is adjusted, let's say the float or the market cap, instead of it being, you know, 1 to 5, it's, it's 10 to 20, and how that then changes the result of the trade or the probability of a trade? Do you think a lot of traders just kind of skip a lot?

They really miss that specific because it's all about trading. It's all about supply and demand. Now, if there's lower flow, higher volume, of course the stock's going to push much higher. Now, if you're shorting the average 25%, you are missing that extra 10%. Of course you're going to get shaken out and potentially take a loss. So it's very— you have to be really strict on the criteria and to prevent from you to make mistakes like that.

Gotcha.

It really screws with the performance.

So then bound short, where does that— how does that differ into the gap short?

Okay, so the bound short, first of all, I want to explain the psychology behind bound short. To be able to trade bound short, we typically have to look at um, the long-term chart. So, uh, first of all, we want to go back in 1 year. Uh, the chart ideally that we want to see is individual, uh, candles that creates massive amount of resistance. So ideally something like flat, then we had one spike, uh, on the volume bar probably trades, let's say, 30 million. Price, $5. Oh yeah, I forgot to cover the price. All of those tickers, the price has to be over $3. If it's not over $3, it becomes very difficult. It also messes with the statistics as well.

Okay, so $3 price for all 3. Yeah.

Now, the reason why the bounce short works is, okay, so after this day, after the big spike into $5 from maybe $1, it drops all the way down and stays flat for 2 months. Ideally, then all of a sudden we see a gap up short. Okay. Gapped over 100%. Let's say gap from $2 to $4.5.

Gotcha.

When we run into this type of situation, is first of all, we know that we traded $30 million volume on this one candle and we dumped after the day after. So majority of the volume are stuck around $5 and it's been 2 months. Everybody's stuck. They don't— they want to get out. As soon as they see a gap up short, a gap up, they want to exit as soon as the market open. So it will create that massive selling pressure just based on human psychology, because they want to break even. They're down 70%, all of a sudden they're up close to even. The majority of people are like, your first reaction by human psychology is to sell. Yeah. So once you sell, you create a selling pressure. And I'm opening up a short position at open. So I'm riding your selling pressure all the way down. And that's the pattern based on human psychology. So first of all, there's still criteria in there. The very first one is your— in terms of dollar amount. So basically we use the bottom $30 million times the price, the most consolidated price. So let's go after we look at the 1-year chart, we find this candle, we go into the intraday chart, we want to see something like it gapped up, it consolidated for a while and dropped. So now the average consolidation price is at $5. Okay. Then we want to, if you want to go into the very precise way, is you basically calculate all of the longs combined together. Because some of the volume traded at under $5. So you want to go into maybe a 1-hour chart or 30-minute chart to combine all those volume at the bottom. So, you know, maybe at the $5 area you traded 25 million shares. Okay. Now, once you know there's about 25 to 28 million shares traded around $5, now you use the 25 million times 5. So you're looking at maybe 120 million $110 million block. So it's how much dollar is being blocked at $5. Okay, gotcha. Now, if you, after that, you go into intraday. First of all, you take a look at the volume estimate. So take a look at the pre-market volume. Let's say if it traded around $3 million, you're estimating that not by regular standard, you're estimating times 10 throughout the entire day. So 30 million throughout the day. But something you have to keep in mind is, you know, that there's going to be selling pressure at open and you short. So typically stock opens up and plummets 15 to 20%. So somebody are looking to long at the open, when they see stock plummets 15, 20%, they're not likely to buy.

Yeah.

So the volume estimate will significantly reduce. It reduces sometimes up to 50% to 80%. So you're looking at 30 million, it reduces to 10, 15 million. And 10 to 15 million amount of shares. So 10 million to 15 million cannot compete with the 25 million. Yeah, 25 million volume that's stuck at $5. So the ratio becomes 2 to 1. So in terms of volume, yeah, duty, uh, rough estimate, 2 to 1. And that significantly increases the Bounce Short winning percentage. So, uh, this is typical way I take a look at how much volume is driven and intraday and to calculate, uh, winning percentage. The ratio is very important. The higher the ratio is, the more I will size in. So if it's 1 to 1, I will reduce size. 2 to 1, increase size up to— I have seen 10 to 1.

So 10 to 1?

Yeah, I've seen there's one example at GME, the volume estimate is almost 10 to 1. And that opens, as soon as it opens, instant crashes 50%. And that trade I made, it was very early in the day. So I made about $1.5 million. So just seeing that. 15 minutes.

Wow, that's crazy. But it's all based off the fact that, as you— because you said it in the podcast as well, like, you really center a lot of your strategies— yes, statistics and data, but human psychology.

Correct.

So in this case, it's really— it's kind of a combination of how the statistics reflect the human psychology.

You have to combine to increase your winning.

So when you see this ratio increase, it's essentially that, that emotional element is increasing with it, correct? Yes. So then therefore you have more conviction because you know there's going to be max pain, if you will, which then creates a lot of time. Max pain is reflected by a very fast volatile move.

Correct.

Yes. So one thing to keep in mind is the dollar block has to be 150 million plus to be ideal. Now sometimes you get to 130, 140. I mean, it's doable, but ideally you want to get to 150 million.

And then in terms of the criteria to enter here, so that this has taken place, is the entry looking around here?

Now the entry really depends on the open price. The closer you're getting to the consolidations, the more size you can get in. Okay. Because there's less risk. Yeah.

So this is almost similar to a gap short, but it has to have this criteria prior to it.

Correct.

Yes.

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Ideally, there's about a couple different variations on bound short. There is if it gapped in close to 5 without much volume being traded in the pre-market, let's say 3 million, maybe 5 million. It increases the winning percentage by statistics. Now, if it's spiking from the very bottom, so after market open, yeah, the stock did not move in the pre-market. So it slowly goes up per bar to 5 and comes back down. This is type, let's say this is type 1. Okay. It's type 2. Type 2 winning percentage is much higher than a tap 1 winning percentage is much higher than tap 2. Okay, so it's a little bit—

so in this one it might take the high and then still collapse?

You will approach to the high and collapse.

Got you.

So now the variation on the fading is a little bit different as well. When you run into a gap into 5, majority of the time you see straight down. If you run into something that volume builds from the bottom, goes up, you're likely to see a bounce, then fade back down. Okay. And the fading percentage is also different. This one fades, let's say the total gain is from here to here. It fades about 75%. This is the 75% from the very top. Okay. This one ideally only fades about 50% from the top. So if you count the range, yeah, cuts in half. That's in the 50%. That's the max reward. This is the max reward.

So in terms of a bounce short, how often or what's the frequency like per year?

The winning percentage is much higher than gap up short. It's about 80 to 85%. It happens around 30 times a year. Yeah.

So 30 times a year and then 80 to 85% correct win rate.

Also, there's specific sizing rules. Okay. Ideally, you do not want to exceed 10% of the float. Also 1% of the volume. Make sure that you keep that in mind. If you size in too much, especially on low flow, 10% of the float, you are likely to break the supply and demand Chen, and it becomes very difficult. So because I have grown my account to much significant size and have run into this type of problem that if I'm sizing too much, I'm breaking the pattern. So the problem is you want to size it into a specific threshold. And whenever— now, back in the days, the stock let's say the stock goes to 4.5, touching the resistance at 5, it goes straight down to 2. Majority of the time I just wait until the close and cover at 2. But if you are using significant size, let's say you are shorting 500K shares, 300K shares, you want to cover along the way. You want to give the supply back. Okay. For people to react. So it's different, man.

You have to start playing a different game at the higher levels.

Yeah.

That's incredible. And, uh, yeah, again, seeing these statistics, and, you know, it's really great to see because this is the amazing thing I love about this channel in particular, is that we get to have the conversation on Words of Wisdom, the podcast. But then, you know, now to see the actual visualization of, you know, when you're talking about statistics and also the human psychology, now we can see that bridge and that connection in real time. And then we're going to see the actual trade examples as well. But just before we do that, we have the first red day setup. So would you say your first red day setup in terms of rules Is it slightly different to what you've seen out there already?

Correct.

Yes.

First red day, basically you are running into much bigger competitions, especially this year, for example, just happened. A very naturally developed first red day was the BYND chart.

Beyond Meat.

Yeah, that one is very it's a very standard first red day to talk about. So first red day, there's a lot of criteria. So first of all, it's not just first red day. There's a lot of preconditions and there's a lot of criteria you have to avoid. If you don't avoid, the first red day will become first losing day. So I have traded many first red day. There's about 3 things you pay attention to. First of all is estimated volume. This estimated volume is very different than gap up short and bounce short. I'll cover that later. And it will— there's also a dollar block. There's also intraday fluctuation range. Okay, so let's go into the very first of how you really spot first red day, how you really consider it something that's a first red day.. And because if you don't qualify on first red day, the reward, the entry and exit becomes really messy and it's hard to make a profit from. So the very first thing is your initial market cap can range over than $100 million. Typically we want something that's under $200 million. So before if you see something that's going from 1 to 10 and the market cap went from— it's already $600 billion, but you want to divide by 10 because it went from 1 to 10. So the initial market cap is, say, $500 million right now, then divide by 10, the initial market cap is $50 million.

Got you.

Okay. So ideally initial market cap has to be under $200 million. The first criteria you want to go into is consecutive green candles with higher volume, either identical or higher volume. Okay. There cannot be a red day or a flat day in the middle. It has to— you see emotional chasing going up day by day, volume higher by previous day. At very least, 3 consecutive candles with volume increasing. Consistently increasing.

Do you need that volume for those 3 consecutive days to increase?

Correct. Okay. Also, we need the range as well. So typically, if you only see 2 days, there's exceptions for 2 days. This is where I made the D-WAC trade. You only went up for 2 days, but the range has to be much higher. So the range creates for 3 days minimum has to be 300%. For 2 days has to be 1000%. Wow. So you can see it's Significant. Yeah, very different.

Would you still, even with this one, you want to see obviously the volume increase on the second day?

Correct. Yes.

Which would naturally happen if it's doing 1,000, right?

Yes. So if you see, like, let's say a red day stuck in between and the 3-day resets. So, okay, the resets starting from here. Okay. 1, 2, 3 days. Yeah.

But that volume again.

Yeah, it has to be long. If it gets another red day, resets again.

Okay, got you.

So you can see sometimes you run into multi-day runners and you say, why doesn't it work? Because it's been, it's up for so long and the stock went from $2 to $28 and still got room to go up to maybe in the hundreds because you have those red days in between resets. It's emotional for people, emotional rebalancing. Yeah. Yes. So now assume that you don't have the rarity in between. First of all, when you run into something like it's an asset, the minimum is 300%. But how do I really try to capture the top? Because once it goes to 300%, it might go to 500%, 600%. If you don't time it right, of course you're going to get squeezed and to take them, you know, short setting has to be very precise or you are taking a huge amount of risk. Yeah, huge amount of risk and potential to lose more than 100%. So this is where I was back in the days. I was trying to dig how to really precisely capture the top. I have sectioned for initial market cap. So you kind of have to look into other people's mindset for the big larger players because it's much larger market cap. Ideally, that's for hedge funds. You do not want to push more than 30% of the entire market cap. Yeah. Or in an entire float. If you push more than that, you are basically playing with yourself. You're pumping and dumping by yourself. You are not going to make money. So you want the retail to participate. Into the trade to basically transfer their money into your wallet. It's a very simple explanation. So now if you can only size in maybe less than 30%, there is a problem is there's only how much dollar retail can pour in and there's no more money being poured into this ticker. Yeah. So as that exhausts, then stock crashes 50 to even 75%. Typically the first green day, it was initiated either by a very beaten down chart that's squeezing the shorts and retail start chasing back in, or something that a big hedge fund starting on buying huge chunk of the float, starting there as well. In terms of the chart, there's a little bit difference as well. So if you're looking at a long-term chart, uh, if the chart is keep trending down, trending down, trending down, and all of a sudden you have 1, 2, 3, those, uh, multi-day runners become— then qualifies the first red day. These type of chart tends to go up a lot more compared to the average long-term chart that is flat than 1, 2, 3 as multi-day runner. So keep that in mind. Then let's go into how to really capture the top. The first of all is pay attention to, as I said, the initial market cap. If the initial market cap is on, let's say, section is under $50 million. Yeah. Now you want to— let's say you don't know how to trade first red day. You want to get to know that. How do you really— you want to section all of the multi-day owners and calculate at what type of volume they trade on consolidations and stock and then starting to drop on that very tip. So you can calculate what's the dollar amount being traded at the very top.

Yeah.

And I have tracked them all together. I have hundreds of samples. I found that pretty much the same market cap, initial market cap rounds up all the way up. And they all, even though they're— well, their market cap and flow has to be under the same section. And but the price is different. So but pretty much all of those multi-day runners that qualify for First Red Day, if they are within the same initial market cap, they all stop at the same dollar amount.

Really?

So very similar. So either if it's initial market cap, they stop at one. Once they trade, let's say $200 million at $5, 200 million shares at $5, it is $1 billion, stock starts to go down. If initial market cap is $100 million, you trade $3 billion, stock tends to go down. Starting at $200 million, it trades at maybe $5 billion to $10 billion, stock tends to go down and you have— you want to section them by their initial market cap. So if a ticker starts at, let's say, IPO at $300 or $500 million, IPO is a little bit different. Yeah. And their dollar blocks starts around $30 billion. So then it starts to go down. Now this one applied to CRCL that happened this year. So that's something that you want to look at. And now how to really predict when it's coming and also to prepare yourself, because I have run into a situation that I keep taking losses on the way up and I'm making profit on the way down. Basically, I'm neutralizing my losses and wins. So you want to avoid how to take a lot, not to take losses on the way up. This is where that you want to track down that average volume increasing. So ideally, let's say it starts at 50 million shares at the very bottom for this one candle, then the next day goes up to 70 million because the volume has to keep continue to increase. The next day goes up to maybe 100 million to 120 million. So now on the fourth, there's a possible chance that can go up to 150 million to 200 million.

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Once I figure out the initial market cap and I know the dollar block, I can calculate. So basically, the first one, let's say, started at $5. Now if I'm trading something that's a lot— sorry, much larger market caps, I know that in average on the daily volatility is around 30% to 50%. So I kind of know that in the next day maybe trades around 8 to 12, the next day trades around 12 to 18, and next day trades about 25 to 30. So on the second day, I'm already looking at the chart. So, okay, what day is likely to reach its maximum dollar amount before it drops? Yeah. So I'm calculating maybe on the pre-market, I'm looking at it. Okay, today's volume estimate, it's pre-market times 10. It's going to reach about $100 million at 12. Now the dollar block is $3 billion. So, okay, well, today is not likely to reach that. So I'm just going to don't touch it. Okay. And turn off the computer and going to the next day. Now, if it's $3 billion trading around $150 million at 20 to 30%, at 20 to 30%, this is the day it's likely to reach. Okay. Its dollar amount.

So this allows you to go one step away. You don't have to just focus and just watch it for no reason.

Yes.

Avoid losses most of all, because again, with the first red day, That's the biggest thing. You're trying to almost predict when this is going to turn to get the high-risk reward trade. Correct. But in doing so, loads of people just end up, as you say, just take losses.

So many people take loss. I mean, I'm also one of them. Yeah. So I have to really dig deep into how to really avoid it on the way up because first red day you're shorting. Of course, stock can run up 2,000%, 3,000%. But you're shorting, the maximum you can only make is 50% on a massive crash. So being very, very precise is very important. This way prevents you from taking losses on the way up.

And so did like Beyond Meat, did that fit this criteria or was that slightly different or did it fit the first red day with these rules?

Now Beyond almost fitted the range.

Okay.

So all of those things have to combine together.

Yeah.

It's not just one. It's a various market doesn't give you like a textbook.

Of course. Yeah. This is like I always highlight like this whiteboard thing is like textbook. This is what we're showing as a textbook. And then we go on to the actual, you know, reality from the trade examples and stuff. So because it's easy to see this and think, oh, this is easy, you know, we can— it's going to be perfect like this. But yeah, no, it's good to highlight.

It's not as simple because there's also— you need the experience of control size. Yeah, control size and control your risk. Because the— as I talked about the gap up short and bounce short, I also said that based on the winning percentage, you sizing more. Based on the winning percentage, if it's lower, you sizing less.

Yeah.

And also the volume ratios, you have to pay attention. Let's say the volume ratio is significant, but the price is barely $3. Now how are you going to size? You're going to size even smaller because it doesn't really meet the $3+ criteria. Now if it's like $2.8, $2.9, barely touches the criteria, you know, it's— you have to kind of size down as well. So there's a lot of experience by controlling size. Yeah, like pay attention to the little criteria.

So in terms of this, then frequency-wise, What was the frequency of the first red day?

The frequency of first red day happens between 5 to 10 times a year, but this one doesn't have a size limit. So you can, if your account is big, you can really grow your account by only focusing on those first red days. For gap up short and bounce short, typically now there's exceptions and other than like GME, AMC, those hyped up tickers, that only happens maybe 2 to 3 times a year. Average gap-up short and bounce short, the maximum size I personally have touched is around $1 million to $1.2 million. So your average win on each of those tickers, probably $200K to $300K max. Yeah. On first red day, then you can make up to millions, even billions.

So, so on that first red day for you, you had on Beyond Meat, that was a $7 million. $1 trade?

Yeah, I, yes, that I think I could really push it to maybe $13 million, but you know, it's the size has become so much so big that it's really affecting the ticker. If the trade doesn't really work out, I have to cover my size. I have to take extra maybe 5% loss or 6% loss because of my size. Yeah.

And that's why— do you feel like that's almost pushed you to really look into the statistics and data a lot more so that you can really minimize those losses? Because if you get trapped in at that sort of size, it's going to be— yeah, it's exponential.

It's a disaster. Yes. So, um, the, the bigger the size is, the more difficult the game becomes. Perfect.

And in terms of just the entry then, um, before we move on to the chart examples, what would that look like for first red day? How do you look to actually cite, you know, when's the right time, or How do you go about the entry on the first red day?

So let's go into the entry day of the very last day of Multi-Day Runner. So once we have the pre-market, then we consolidate and we have reached the dollar amount right here, $3 billion. Then the first thing I'm looking at is don't rush shorting on the current day because it can do something like that. Run into that type of situation before. So you get, you think it's going to break its double bottom and it does a fake out and crashes down. So on the very first day, once it reaches, only size in maybe 1/4 of your positions. The reason why is momentum doesn't likely to shift when the volume is extremely, extremely high. So you are waiting for the second day because second day tells you the stock is going to drop. Now, the reason why is apply into the bounce short concept, because in the bounce short concept is on the intraday volume, you are not going to compete with the resistance volume. There's more people selling Apple than the current day buying Apple. Now, it's the same concept after we go into the second day is during in the pre-market, the volume trades significantly less. Maybe even, so let's say on this day traded 200 million volume, pre-market only traded 7 million or maybe even 5 million. So by volume estimate, you are not going to compete with the 200 million on the previous day. The volume ratio becomes significantly different, becomes 4 to 1 or maybe 3 to 1.

And this is where we're entering the first red day. This is the prior day.

Yeah, this is where entering the first red day.

Got you.

Ideally, majority of the time you're not going to see bounce. So you kind of have to calculate. The reason why we're sizing 1/4 is to bring up your average by sizing in at most at the open because ideally you want to size at the bounce because you minimize your risk. But on average criteria samples, I don't even see the bounce that happens at the open. So pay attention to this gap because this is where your risk is by risking the consolidations and you just ride it the way down. Typically, this range is pretty wide, maybe between like 10 to 15%, but winning percentage on this first red day can get up to 90%. So you can really push size. And yeah, I have seen some tickers that push into the resistance but still fail. So the winning percentage is extremely high. It's worth the risk.

Yeah.

So you put a stop loss above the consolidation. If it's had a spike, would you put it above the spike or just still above the consolidation?

Still around the consolidation.

Got you. So, yeah, and then entry-wise, you got one quarter of a position here, and then on the bounce, you would look to size in the remaining of the position, which should in essence could be around a similar area or just short of that.

Correct.

Yes.

Got you.

So for all the new traders out there, I mean, I have grown from new traders from now I'm trading for almost 10 years plus now. Make sure that whenever you are designing a strategy, it's fundamentally tied to either human psychology, has to be logically make sense.

If it doesn't—

if somebody give you, let's say, follows the criteria of this one has to meet a certain criteria that doesn't make logically or psychology in sense, and then the strategy is not likely to work. And also, if you want to be consistent profitable, test the strategy by yourself first. Yeah, that's very important.

So in this video, I'm going to cover 3 specific patterns for gap up short, bounce short, and the first red day. So I'm going to give an example for each to show you guys what to look for on first red day, gap up short, and down short. So let's go over on the first one, first red day. So specifically, you can go— first of all, you want to look for some parabolic action so that the price trend is speeding up., and it's trading more volume on the previous day. And on the third one, which is very important, is you need consecutive green days, uh, at least 3 days. So 1, 2, 3, 4, 5. But you can see on this day is red day, so it makes it really difficult to predict, um, the following red day. So for the first red day, uh, it is that you spot the first red day and you short on the second day. So let's say you spot the first red day. You had a 1, 2, 3, so it closed red, but on the day it was green. So now it still fits the 3-day consecutive green day candle. Uh, then going to the following day, if it's green, then you do not want to short it.

You want to stay away. But if it is red, yes, you can.

So for this case, it has 1, and then if it had a red day in between, uh, then it does not count for First red day, it needs to reset for another 3 consecutive green days. So 1 and 2 and 3. So this one closed red, but it was green during the day. So it closed red, and after open, it gapped down. So it's for sure that during the day it's going to trade in red. And for— on the following day, for silver, this is a very good trade, uh, for potential first red day pattern. As long as the first red day doesn't crash over 50% of the entire gain. So in this case, the entire gain started starting from $50. If you do a range, this is the whole run-up and gap down to here. So the 50% is actually here. So it's still— there's still about a bunch of reward after the open. So you're shorting around $92, $93-ish, is still doable. Um, personally, uh, I think I got scarred by attempting to short one here and probably one here. I wasn't really focused on first red day pattern, so I made two mistakes on those two.

So got scarred, do not want to take more losses on silver, then I did not catch this first red day.

But this is a classic first red day pattern. Um, so 3 conditions. First of all, look for a parabolic action. Second, look for 3 consecutive green days that volume has to pass each on the previous day. Now, if you want to go into detail, then you want to— you can see the volume is actually decreasing from the previous day by trading a higher price. So the actual dollar traded volume is bigger than the previous day. So the, the standard is the dollar amount. So the average dollar traded on the day times the volume has to be greater than the volume times the average price traded on previous day. So that's the 3 conditions for first red day. And also make sure that the range is suitable for shorting after the first red day. There's not a specific market cap range because it works on pretty much all market caps, silver and Ideally, it's much better to predict, uh, on small caps. So small caps, 3 consecutive green days, uh, with at least 300% range from the initial breakout, then it is doable and also qualifies for the first red day pattern. So that's the example for first red day. Then let's talk about a gap-up short, a specific gap-up short. There's all different variations of a gap-up short.

So let's talk about BIRD first.

Now, one of the reasons why gap-up short doesn't have a high winning percentage is a lot of people tend to short on a ticker that's very crowded. So, uh, on BERT specifically, this one traded about, I think it was around 70 million shares in the pre-market. Uh, there's one condition that if a ticker trades more than 50 million volume before the market open, it is ideally not tradable using gap-up short. So majority of the gap-up short, if it has strength at the open, it will spike up and goes into a consolidation.

That's right here.

Um, then you can see you squeezed all the way up. So if the ticker is really crowded and it traded like 50 million shares before market open, and it's ideally going to trade a couple hundred million shares throughout the day, so before 10:30, if you are trading, uh, 150 million shares, there's going to be another 150 million shares going to trade after, after this consolidations. So majority of the time it tends to not work, on the breakouts. So, uh, on the shorting the breakdown, sorry. Um, once the crowded day is over, going to the following day, if it gaps down, the volume will dry up. That's where your shorting opportunity, uh, tends to appear. But this is one of the examples you do not want to use gap-up short on. This is one of the gap-up short pattern. Uh, the initial spiking point is $3. So it gapped all the way to $9, and when it spiked up, it pushed through the pre-market consolidations, and it topped out around $12 and faded all the way back down.

Of course, on the following day, it faded back down again.

The only reason why this one didn't fade all the way back to $4 is the flow is too low. So if the volume trades very crowded. If it trades over, it's relative. So let's say it trades 30 million volume, it's already very high for a float that's around 700K float. Ideally, if float rotates more than 15 times, it is not very ideal. So this is generally crowded, so the reward will get reduced on gap-up short. But this is one of the variations on gap-up short is EEIQ. If the flow is really low, you want to wait for a clear signal for you to short, specifically on something that drops 50% from the top, then bounces.

That's where you short.

So in this case, there's two methods you want to go with this. So first of all, you want to spot the float. Let's say if it's under 2 million, it's considered to be a very low float on nano float. If it's trading on very dense volume, over 15 times of the float rotation, after the clear signal of 50% pull on the bounce, this is where you enter. But if the float is around 5 million or 10 million, you can try to short against the pre-market high, and that's where it tends to top. So this is— there's about two ways I go for a lower float to a higher float. Now, gap-up short, there's a bunch of details involved based on the float amount. If the float is about— it's between 3 to 5 million, then you want to— you want to size in but not in full size. If the float is much higher, let's say 7 to 8 million, then you can size against the pre-market high by using maybe 50%, 60% of your initial position. So it's all based on statistics, how low is the float and how much the volume trades throughout the day. And also the lower the float, the more dangerous it will be. And the lower the float, that if it passes a 1 million threshold or under 2 million threshold, You want to wait for a clear signal that momentum is shifting, then shorting into a bounce. So that's for gap-up short. Uh, let's say bounce short. Bounce short is relatively easy. Um, here is one of the, um, examples for bounce short. So this one went from 2 to 6, trading around 100 million volume, going— then it tests the previous day high. Trading with much less volume, it faded all the way down. So first of all, for BoundShort, there's a market cap limitation that ideally works under $200 million market caps, under $50 million float. You want to spot that a single day candle has ideally more than $100 million volume. And also trading into consolidations. So let's take a look at March 30th. So you can see the consolidation, majority of them landed around 5.6. So going into a bound short, like if the ticker spikes up, you want to aim for this consolidations as your risk to build your positions and also make sure that sizing proportionally to not let your risk go off the charts. Um, then going to the 2-day later, you had a bounce. You can see it tested, uh, it was consolidating around 6 into resistance. So shorting at open, it's not too bad. Uh, this is one of the bounce short that happened. It was trading much less volume. And also you want to do a bound comparison that the current day volume estimate has to trade much lower compared to the concentrated volume that traded on the first green day. So specifically for gap up short, you can use gap up short as first green day. If it's crowded, then you do not want to use gap up short. You can use that consolidation as a risk to short as a bound short. So the patterns tends to work out with each other and helps you to— some conditions helps you to avoid big losses on the first green day. Don't trade the crowded tickers on the first green day without resistance. Ideally, if the flow rotates more than 15 times, you want to reduce your size significantly. Other than that, that'll be all of the examples gap up short, bounce short, and first red day not happened in 2026.

So that'd be all. Thank you.

I love that.

Thank you, Steven. I appreciate that. And no better words to say than after Steven there. So this has been Chart Fanatics. Take care.