TLDR;
In this episode of Chart Fanatics, Trader Kane, the founder of The Lab, shares his relatively basic strategy focused on price rebalancing into 50% of a range and continuing with the trend. He emphasises the importance of daily, H4, and H1 Power of Three (PO3) setups, accumulation, manipulation, and distribution. Kane focuses on NASDAQ, using ES for divergence confirmation, and aims for quick, base-hit moves by trading reversals at key levels.
- Focus on price rebalancing into 50% of a range and continuing with the trend.
- Importance of daily, H4, and H1 Power of Three (PO3) setups.
- Aims for quick, base-hit moves by trading reversals at key levels.
Introduction [0:00]
Trader Kane, founder of The Lab, is introduced as a top trader with a record payout in prop firm history, exceeding $2.3 million. He recently turned $130,000 into over $1.4 million in about a month. Kane shares his strategy for achieving these results, focusing on price rebalancing and trend continuation.
Kane's Core Trading Strategy [1:10]
Kane's strategy revolves around waiting for price to rebalance into 50% of a range before continuing with the trend. He uses the daily, H4, and H1 PO3 (Power of Three) concepts, focusing on accumulation, manipulation, and distribution. Kane aims to capture small, consistent moves rather than trying to trade the entire trend, reducing risk.
Daily Timeframe Analysis [1:55]
Kane analyses the daily timeframe, looking for price to manipulate above or below the daily open. He waits for price to trade into around 50% of the range and then targets 50% of a smaller range within that. He anticipates the daily candle to form with a wick above a key area, indicating manipulation.
Combining Timeframes and Power of Three (PO3) [7:22]
Kane combines the daily timeframe with the H4 and H1 timeframes, seeking alignment among them. He anticipates daily, H4, and H1 PO3 triggers before looking for entries. He uses market maker theory to frame his daily candle within an accumulation, manipulation, and distribution perspective.
Fractalising the Strategy [10:09]
Kane applies his strategy fractally, using the same logic across different timeframes. He looks for the H4 and H1 to align around 9:15 to 11:30 EST, capitalising on the 9:30 liquidity injection and the potential for a 10:00 reversal. He focuses on trading the manipulation back into the range, aiming for a premium discount.
Pros and Cons of the Strategy [12:38]
The pros of Kane's strategy include catching highs and lows of the day and achieving quick, profitable moves. The cons involve trading reversals, which is inherently riskier. Kane emphasises the importance of break-even trades to manage risk and highlights that patience is crucial.
Risk Management and Break-Even Trades [14:09]
Kane is very fond of break-even trades, aiming to minimise risk as soon as possible. He emphasises focusing on risk over reward and getting out of a trade quickly if it goes wrong. He notes that aggressive management of break-evens is essential for the strategy to be profitable.
Holding Trades Longer and Market Conditions [16:11]
Kane typically aims to take his trade and exit the market, but he acknowledges the temptation to hold longer for bigger gains. He notes that statistically, price often returns to 50% of the range, and he adjusts his stop loss accordingly. He advises against playing for extreme moves every day, as it can lead to being chopped up.
Patience and Mindset [18:32]
Kane stresses the importance of patience and avoiding overworking by sitting at charts for excessive hours. He reiterates that his strategy is risky and requires patience to let the model play out. He also mentions that even though ENQ has been quite bullish over the last year, he is still looking at sells.
Multi-Asset Application and Timeframe Flexibility [25:59]
Kane's model can be applied to multiple assets, including Bitcoin, due to its basis in market maker theory. The strategy is fractal, allowing traders to use higher timeframes for swing or position trades. He believes the market delivers into 50% of ranges and redelivers into 50% of another range.
Entry Confirmation and Divergence [28:47]
Kane uses divergence between ES and NQ as an entry confirmation. He looks for relative weakness in one asset compared to the other. He aims to position himself in the wick of the hourly timeframe, seeking an imbalance that impulses higher.
Trade Management and Targets [31:30]
Kane looks for an entry once an SMT (Smart Money Technique) divergence trades below a key level. He either limits a re-tap into this area or sells stops, targeting 50% of the range. He emphasises that traders only need to capture the move from the manipulation to 50% of the range.
Combining Higher Timeframe Analysis [34:16]
Kane advises traders to mark out key levels on the daily, H4, and H1 charts and create a box where they all align. He uses the range as his primary logic and combines the H1 PO3 inside the H4 and daily PO3 for larger targets. He recommends starting with base hits to build confidence and gradually incorporating higher timeframe analysis.
Chart Examples and Trade Walkthrough [39:44]
Kane walks through chart examples, starting with the daily timeframe and marking out highs and lows. He then drops down to the H4 and H1 timeframes, looking for premium discount ranges and PO3 setups. He demonstrates how he uses divergence and inversions to identify potential trades.
Trade Example: Thursday [43:31]
Kane provides a detailed walkthrough of a trade he took on Thursday, explaining how he marked out previous day lows and used the Asian range as a reference. He waited for a divergence at 2:00 AM EST and then looked for a breakdown at 10:00 AM, aligning with the H4 and hourly PO3.
Trade Example: Monday [58:31]
Kane reviews a trade from Monday, highlighting the 9:30 drop and the subsequent push-up into discount. He explains how he waited for an SMT to form and then sold stopped the trade, aiming for a larger target. He also discusses the importance of being break-even as soon as the 15-minute low is taken out.
Bitcoin Trade Example [1:03:40]
Kane shares a Bitcoin trade example, using a weekly PO3 and a daily imbalance with SMT for entry. He held the trade for nearly a month, targeting 50% of the range. He notes that the margin requirements for swing trading NQ are prohibitive, making crypto a more accessible option for longer-term trades.
TradeZella Statistics and Data Collection [1:08:25]
Kane showcases his TradeZella dashboard, highlighting his P&L, win rate, and average win/loss ratio. He emphasises the importance of collecting data and having confidence in the model over time. He notes that journaling bad trades and backtesting are crucial for improvement.