Jan 202014
 

Day Trading or Swing Trading with Candlestick Patterns and Pivot Points.

Now I want to introduce you to another valuable lesson using this method of price forecasting. By taking the daily, weekly or monthly numbers you can target a price level and wait for confirmation from a recognized chart pattern. This can help you in taking advantage of the price swings from the market reacting off of those numbers. By having the calculations based on the different time frames, one can use them for day trading or swing trading.

Below in figure 4.5 is the Dow 10 dollar per point futures contract. Here you will see an hourly candlestick chart pattern. I normally use the 60-minute and or a 15-minute time period for my studies. In this example we see once again a good example of why this is not exact science. The S1 Support target for the trading session of 1/25/02 was 9751. The actual low was 9735. That is 16 ticks of slippage, which equates to 160 dollars on the 10-dollar per tick contract. By watching the hourly closing time period to see if a Bullish candlestick pattern appears at an important level of support or a Bearish candlestick pattern at an area of resistance, I am able to determine a trading plan with a higher degree of confidence.

In the example below, using the data from 1/24/02 (high 9855, low 9760 and close 9794) we calculated the S1 SUPPORT for the next day (1/25/02) at 9751. The second hour of trading on 1/25/02, a Bullish Engulfing pattern formed and generated a strong buy signal. The opening of the third 60-minute period gave an opportunity to go long near 9790 using a stop below the low of 9735. In fact, a stop could have been placed below 9750 so the risk would be down to 400 dollars (10 times 40 equals 400). Within one hour the market advances up to the 8960 and gives an opportunity to move stops up or get out of a long position near the R1 resistance number of 9846. Three hours later the price advances up to a high of 9895 generating an opportunity to liquidate the long position near the Daily resistance R2 of 9898.

 

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(Figure 4.5)

The reaction of the market when it trades near these pivot numbers can be a significant bounce when near a support number or the market can simply stall before blowing through the support number and then continuing the trend lower. In my experience there is usually a “reaction” from the numbers. The longer time period (weekly or monthly) the calculation is from, the bigger the reaction can be. Really the only thing you as a trader needs is to get in the market, capture a significant price move, get out and profit from it with this Simple Strategy for Day trading or Swing Trading

The chart below in figure 4.6 is a 60-minute chart starting on Tuesday July 16th and ending on July 30th 2002. I am going to demonstrate how the Pivot Point Analysis, based on the weekly numbers, in one of the biggest down months in S&P history targeted the support level and called for the low within 9 points!

The week ending 7/19/02 had a high of 929.5 the low was 840 and the market closed at 844. The fundamental backdrop was so pessimistic with all the corporate accounting scandals, doubt that the economy could sustain growth, Middle East tensions were flaring and earnings were coming in weaker than expected. There were not many indicators that were calling for a low or a turn around in the equity markets.

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Simple Strategy for Day trading or Swing Trading

Swing Trading Using Candlestick charting with Pivot Point Analysis

 

Jan 162014
 

What is the best day trading strategy for beginners?

A day trading strategy that beginners can easily use to make money.

A day trading strategy that beginners can use as a starting point to learn and improve, while minimizing losses.

The Best Day Trading Strategy For Beginners

Novice traders should not be driven by profits. Instead, their day trading strategy should focus oncontrolling risk and developing the trader.

Day traders who are just starting out should not be led into the glamour of raking profits day after day without first understanding the risks of day trading.

To ensure their longevity in the market, day traders must be able to learn from their trades and develop the right trading attitude.

Look out for day trading strategies with the following characteristics to start your day trading journey right.

1. INFREQUENT DAY TRADES FOR BEGINNERS

Beginners should trade infrequently. For traders who are still grappling with their trading edge, trading less is definitely better than trading more. It is a form of risk control.

Trading infrequently also gives you time to learn from your trades. You will also be able todevelop a greater awareness of your emotions and keep them in check. Taking dozens of trades in a flurry will only cloud your analysis and fuel your feelings of fear and greed. Follow these tips to to trade with a lower frequency.

  1. Avoid scalping strategies.
  2. Trade higher time frames. (Use 5 minute charts instead of 5 seconds charts)
  3. Be very selective and take only the best trades.

2. DAY TRADE WITH THE TREND

Day traders love to boast about picking the top of the day or low of the day. When you do catch the top or bottom of the trend, you feel like a hero. When you do not, you feel like a loser trying to fight the trend that seems to go on forever.

Trading is not about heroes and losers. It is about patience and persistence.

A trend trader must be patient and wait for a trend to develop. A trend trader must also be persistent in taking trades with the trend and not be tempted to pick the top or bottom. Trading with the trend helps a beginner focus on the right state of mind necessary for consistent profitability.

3. PASSIVE POSITION MANAGEMENT FOR DAY TRADING

A novice day trader should set the stop and target for each trade, and leave them alone. Do not adjust your stops and targets.

This is because a beginner is prone to adjusting their stops and targets emotionally. They make adjustments because they are affected by the blinking profit and loss figure on the screen. Only confident and experienced traders who can manage their trades based on objective analysis should do so.

Rather than meddling with the position when you have neither confidence in your skill nor control of your emotions, leave your stop and target alone. Take out a piece of paper and write down what you would have done if you were managing your position actively. This is a learning process.

Once you have a sizeable sample (>30 trades), compare the the results of passive management versus if you had managed it actively. You can then evaluate if you should be actively managing your trades.

This rule of passive management will also deter a beginner from cancelling the stop loss order, our ultimate risk control tool.

EXAMPLE: ADAPTING THE 9/30 DAY TRADING STRATEGY FOR BEGINNERS

Most day trading strategies can be adapted for beginners. Let’s take a look at how we can adapt the 9/30 trading setup for beginners according to the characteristics discussed above.

  1. The best trades of 9/30 trade setup are the first pullbacks after a new crossover. We will restrict our day trading strategy to taking only these infrequent best trades.
  2. 9/30 trading strategy capitalizes on retracements. Following its rules will naturally keep you with the trend.
  3. Place your target at the previous trend high/low and place stop a tick below/above the signal bar. Do not adjust.

There you go, a sound day trading strategy for a beginner. Remember that the best day trading strategy for beginners is not the perfect trading setup, it is the best starting point towards success.

Take a look at our Day Trading Strategies collection for many other day trading strategies that can be adapted for beginners.

By Galen Woods

Jan 162014
 

RULES FOR  A LONG 9/30 TRADE

  1. 9 EMA above the 30 WMA
  2. Close below 9 EMA (More conservatively, entire bar below 9 EMA)
  3. Buy stop above the high of the bar that closed below 9 EMA

RULES FOR  A SHORT 9/30 TRADE

  1. 9 EMA below the 30 WMA
  2. Close above 9 EMA (More conservatively, entire bar above 9 EMA)
  3. Sell stop below the low of the bar that closed above 9 EMA

WINNING TRADE – 9/30 TRADING SETUP

9/30 Trading Setup - Winning Trade

9/30 Trading Setup – Winning Trade

This is a daily chart of CBRE Group Inc (NYSE). The 9 EMA is orange and the 30 WMA is red. Price pulled back and closed below the 9 EMA for a 9/30 trading setup at the bar before the highlighted bar. However, the buy order above the high of the bar was not triggered. The next bar went entirely under the 9 EMA, setting up a conservative 9/30 setup. The buy order at the high of this bar was triggered and price shot up over 20% in the next two months.

There was clear buying (see the long bottom tails) at the 30 WMA, but the signal bar was a doji with a small bear body. Hence, the conservative trader could wait to enter on the next test of the 30 WMA which occurred four bars later.

LOSING TRADE – 9/30 TRADING SETUP

9/30 Trading Setup - Losing Trade

9/30 Trading Setup – Losing Trade

In this daily chart of CBRE Group Inc, we saw the marked bar close above the 9 EMA and placed a sell order below its low. The order was triggered but prices moved up right after our short entry and never looked back.

TradingNaked stated that the “most reliable entry occur the first time there is a crossover of the moving averages.” This trade was exactly the first one after a moving average crossover but it failed. Possible reasons included the prior upwards trend and the rather bullish signal bar (the marked bar).

REVIEW – 9/30 TRADING SETUP

The strength of the 9/30 trading setup is its simplicity. It is simple to understand and gives the trader more time to observe the price action. Trading-naked also mentioned that “those who focus their decisions almost exclusively on price bars should find it helpful”.

The conservative trade with higher probability of success requires the entire bar to be below the 9 EMA, highlighting the importance of extent of pullback in a trend. The greater the pullback, the more likely that the trend resumption is imminent. However, if the pullback is overdone (as a guide: more than 70% of the previous move), the trend may have ended.

Traders should use this trading setup for retracements rather than reversals, unless there are compelling reasons to consider a trend change.

9/30 trading setup is by Mike Bruns on TradingNaked which contains lots of trading wisdom. Highly recommended.