Breakdown without pre-market data. The 20 period line is our fast moving average, the 60 period is our slow moving average and the period line is the trend indicator. Our trading methods are tested and confirm that are accurate and profitable. Ross and his team are good guys, and if you were to subscribe to all the different services out there and compare them for 3 months, you would see WT at the top of the list. There are many candlestick setups a day trader can look for to find an entry point. After Heikin-Ashi candles are printed, confirm the reversal with Accellarator Oscillator. I never hold a position that has achieved my profit target and hope for a bigger winner.
Another effective method for intraday trading is to trade news releases and economic reports. When a positive piece of news comes out you want to buy the market and when a negative piece of news comes out you want to sell.
The Entry and Exit Strategies
I want to make sure you clearly understand the concept of extended trading range so this example utilizes a stock that breaks outside of the 90 day trading range through volatility and price instead of gaps. Everything beyond that point is the same except the initial set up can substitute the first gap if the extended trading range is sufficiently strong enough.
Here you can see how the stocks trading range is almost triple the recent trading range for this stock. This is the type of strong trading range you want to see breaking out of the 90 day price high. Remember that no matter how good the initial breakout looks you have to make sure your entry is preceded by a gap no matter what.
You can see in this final example how the entry and the exit appear on an intraday chart. Notice I wait for the gap and then enter a market order immediately after the opening gap.
The order typically takes about 3 seconds to execute on a volatile market. I recommend you watch the market closely prior to the opening so that you are ready to go when and if the gap occurs. The Momentum Breakout is one of the easiest and productive day trading methods for traders looking for momentum set ups.
Remember that the breakout can be either a gap or an extended range bar. Either way, you cannot enter the trade prior to a confirmation gap that occurs at the opening after the breakout outside of the trading range. There are many candlestick setups a day trader can look for to find an entry point. If properly used, the doji reversal pattern highlighted in yellow in Figure 1 is one of the most reliable ones. If you follow these three steps, you can determine whether the doji is likely to produce an actual turnaround and can take a position if the conditions are favorable.
Traditional analysis of chart patterns also provides profit targets for exits. For example, the height of a triangle at the widest part is added to the breakout point of the triangle for an upside breakout providing a price to take profits at. For long positions a stop loss can be placed below a recent low, or for short positions , above a recent high. It can also be based on volatility. Define exactly how you will control the risk on the trades.
However you decide to exit your trades, the exit criteria must be specific enough to be testable — and repeatable. Also, it is important to set a maximum loss per day that you can afford to withstand — both financially and mentally. Whenever you hit this point, take the rest of the day off. Stick to your plan and your perimeters. After all, tomorrow is another trading day. Once you've defined how you enter trades and where you'll place a stop loss, you can assess whether the potential strategy fits within your risk limit.
If the strategy exposes you too much risk, the strategy needs to altered in some way to reduce the risk. If the strategy is within your risk limit, then testing begins.
Manually go through historical charts finding your entries, noting whether your stop loss or target would have been hit. If it's profitable over the course of two months or more in a simulated environment proceed with day trading the strategy with real capital. If the strategy isn't profitable, start over. Therefore, using stop losses, is crucial when day trading on margin.
Many of those who try it fail. But the techniques and guidelines described above can help you create a profitable strategy, and with enough practice and consistent performance evaluation, you can greatly improve your chances of beating the odds. Set an Amount Aside Assess how much capital you're willing to risk on each trade. Set Aside Time, Too Day trading requires your time — most of your day, in fact. Start Small As a beginner, it is advisable to focus on a maximum of one to two stocks during a day trading session.
Avoid Penny Stocks Of course, you're looking for deals and low prices, but stay away from penny stocks. Time Those Trades Many orders placed by investors and traders begin to execute as soon as the markets open in the morning, contributing to price volatility. Be Realistic About Profits A strategy doesn't need to win all the time to be profitable. Stay Cool… There are times when the stock markets test your nerves.
In deciding what to focus on — in a stock, say — a typical day trader looks for three things: Liquidity allows you to enter and exit a stock at a good price i. More volatility means greater profit or loss. This is a measure of how many times a stock is bought and sold in a given time period most commonly, within a day of trading, which is known as the average daily trading volume. Reason being, you need enough volume to enter the trade, but also enough that you can potentially turn around in a matter of minutes and close out the same trade you just put on.
Now that the market has opened. I have no study to back this one up, but from my own experience and talking with other day traders the 5-minute chart is by far the most popular time frame.
Within the first 5-minutes you will see a number of spikes in both price and volume as stocks gap up or down from the previous day's close.
This will often be driven by some sort of earnings announcement or pre-market news. This first five minutes is arguably the most volatile time of day. There is no defined range and odds are the previous day's range has been eclipsed by the gap. With no clear boundaries for where to go, to short or buy after the first 5 minutes in my opinion is nothing more than a gambler's paradise. If you are serious about your trading career stay away from placing any trades during the first 5 minutes.
NIHD gapped up on the open to a high of 9. How do you think NIHD trended over the next hour? Let me not keep you waiting too long. All of you advanced day traders will say that the stock continued lower because the stock had such an ugly candlestick on the first 5 minutes.
Well guess what, in this instance you would be correct. Remember I am a day trader, so I already know what you are thinking. You are probably saying to yourself, well Al I can place a buy order above the first 5 minute candlestick and a sell short order below the low of the candlestick.
This is nothing more than saying to yourself that you are going to gamble your money within a defined framework. While using simple strategies increase your likelihood of consistent execution, this approach is too unpredictable.
Some traders will wait out the first half an hour and for a clearly defined range to setup. I have noticed if a stock is going to head fake you, it will often do it at the 10 am hour. Another reason I like 9: After the completion of the 9: The importance of identifying the high and low range of the morning provides you clear price points that if a stock exceeds these boundaries you can use this as an opportunity to go in the direction of the primary trend which would be trading the breakout.
Or you can go against the primary trend when these boundaries are reached with an expectation of a sharp reversal. Below is another example of the stock NIHD after it sets the high and low range for the first mintues. At this point you have one of two options. Your first option is to buy the break of the 9: I believe when you see stocks b-line like this for the first 20 or 30 minutes, the odds of the stocks continuing in that fashion are slim to none. I personally like a stock bounce around a bit and build cause before going after the high or low range.
Your second option is to short the stock with the expectation NIHD will reverse around the 10am time block. I am not a fan because you are just hoping the stock will reverse, but there is no real justification. So, looking at NIHD what would you do at this point? The correct answer is you should stay in cash. As you can see in the above chart, NIHD floated sideways for the remainder of the first hour. Do you see how sizing up the trade properly would have allowed you to miss all this nonsense?
Now that we have already had our head fake example earlier in the article, let's focus on one that follows the happy path. Notice how the stock was able to shoot down and build steam as the stock moved lower. In theory, waiting for a breakout after an inside bar or a tight range will often lead to consistent profits. The key thing to remember is 9: If you place a trade at let's say Unless you are trading ticks, which I think is a sure way to make your broker rich, you simply don't have enough time for the market to move in your desired direction.
The last twenty minutes is where you let the stock move in your favor. This doesn't sound like a lot of time, but if you step back for a second this represents a potential of 40 minutes from the time you first entered the trade at 9: Now there is no law against you holding a stock beyond The key point is you get out of the mindset of letting your profits run.
I honestly get visibly frustrated when I hear people giving this advice to new traders. In today's world there are way too many automated systems and retail investors all clamoring over pennies, stocks no longer move in a linear fashion where you can sit back and place your trades on cruise control. The amount of head fakes and erratic behavior is just over the top. For me, a clear profit target is the best way to ensure I take money out of the market consistently.
Your probably thinking:
Question: What is the best trading strategy for intraday? Answer: Intraday trading will take a great deal of your time because you will be focusing on the charts all day long that you will be trading. This type of trading requires a great deal of focus. Besides the above said trading tricks, here are a few more common trade and investment tricks that you can follow to achieve best Intraday trading strategy: The broker will give the stop-loss level, which will specify the level above or below and the market will say if the call has gone wrong. Trading volume: This is a measure of how many times a stock is bought and sold in a given time period (most commonly, within a day of trading, which is known as the average daily trading volume). A high degree of volume indicates a lot of interest in a stock.