A week ago I presented a great move trading strategy that takes benefit of low volatility periods where markets are consolidating and get yourself ready for the next big move. I purposely demonstrated this technique to you using daily time frame because I wanted you to examine the rules of the strategy and supply you with a bit of time to get familiar with how the strategy works.
As you begin trading more and more you will notice that different strategies have different characteristics and the better you understand these characteristics the higher you will become in determining the right set ups for each strategy.
Since we are day dealing the 2X Inside Day Strategy we must make some minor adjustments. If you recall I looked for the market to make a 50 day price high or reduced the original strategy. I see that with daily charts the 2X strategy is successful using reversals but with day trading it tends to work best with quick reversals. So what I do is look for a set up that occurs following the market made a 10 day low from the current trend. This way I catch industry after a short pause and immediately prior to the market resumes the strong movement. You can see in this type of example how the stock can be trending strongly before it makes a 10 day low and the pattern sets up immediately thereafter. You want to see an extensive bar and two inside times following that bar.
The exit point would become a MOC (market on close) order which you would place after your fill. Many traders try to predict intra-day market peaks and I'm at least one. However, after testing dozens of different exit strategies I ran across this method to work best with liquidating nearby the closing. The momentum is ever coming back into the market after a couple of very quiet days, so typically the momentum follows through till the opening bell, especially if there is extended buying coming into industry. You can see the entire pattern from starting to end on a daily chart with this example.
Once you isolate the set up you can place your admittance order for next day's opening bell. The best way to buy and sell the 2X Inside Day is always to place a buy stop $0.05 above the high price that was achieved on the third day and once your filled you need to place a sell stop about $0.15 cents below your third day low price. These examples are to the long side but the strategy works equally well to the downside. Just you should definitely don't confuse sell stops along with buy stops, this will cause you losses on top of missing out on the buy and sell.
Before I move onto another example I want that you see the entire progression utilizing 15 minute charts. The 15 minute period is what I use for stocks and ETF day trading techniques. When I trade futures or perhaps currencies I switch to 5 instant charts. The 15 minute time frame reduces the quantity of random noise that is seen in intra-day stock chart analysis and yes it helps me see more focused price action.
I want you to obtain a good feel for this method so this is another great example of the nice set up. Notice that that my risk level is gloomier than $1. 00 which could be the ultimate goal when day trading or short term trading any stock. You want to find low risk set ups such as this one so that your threat to reward is exceptionally large. This is very important and is particularly absolutely necessary especially when you're day trading.
You can see how the stock rallied and closed nearby the high of the day. The profit target should always be MOC for such a strategy, especially when you are trading stocks. MOC doesn't mean you will probably be executed at the closing bell, it simply means your exit will probably be filled at the closing cost range which is usually within some cents of the closing price.
You can see one last example for this 15 minute bar chart. I first isolate the pattern over a daily chart and once I'm willing to trade I switch to any 15 minute bar chart along with place both charts next to each other. This way I can see how the pattern progresses on both charts simultaneously. For day trading purposes I don't utilize the weekly chart if your trade involves holding positions overnight I'll start the analysis with any weekly chart and work straight down from there.
The 2X Inside Day Technique works great with stocks, futures and forex markets using intra-day period. Don't forget to modify your settings because the set up uses 10 day's against the trend before the cone shape triangle develops as you move the regular swing trading pattern relies upon 50 day high and reduced prices. If you’re not clear on the difference you can travel to Market Geeks and watch the prior week’s video to review the original pattern. Keep in mind I use 15 minute bar charts for stocks and ETF's along with 5 minute bar charts regarding e-mini futures, commodities and forex contracts.