What are Volume Candles and how to use themVolume Candles are a great chart type you can use to integrate volume analysis into your trading. TradingView is a superb platform that offers this chart type in real-time, so you can immediately get a completely different feel of what the market is actually doing.
As an experienced trader, understanding volume candles is crucial in getting a deeper insight into market dynamics. Unlike standard candlestick charts, which focus primarily on price movement, volume candles combine price action with the strength of trading activity (volume). This offers a unique perspective that can give you an edge in reading market sentiment and momentum.
What Are Volume Candles?
Volume candles are modified candlestick charts where the width of the candle is proportional to the trading volume during the corresponding time period. The typical candlestick elements—open, high, low, and close prices—are still present, but the volume aspect adds an additional layer of information, enhancing the clarity of price action.
Key Features of Volume Candles:
Height: Represents price movement (just like in regular candlesticks).
Width: Indicates the volume of trades within that period.
Unique Information You Can Extract from Volume Candles:
1. Volume-Driven Price Action Volume candles show how much trading interest exists at various price levels. When you observe a large volume candle, it tells you that a lot of market participants were active at that price. Conversely, a thin candle signals lower activity. This helps you:
A. Identify levels where strong participation occurs (institutional players what I call the puppet master).
B. Spot consolidation zones where volume is low, which often precedes significant price moves.
2. Momentum Confirmation High-volume candles that align with price trends suggest strong momentum.
Wide Bullish Candles: If you see a wide up candle during an uptrend, it indicates that the buying pressure is backed by solid volume. This gives more credibility to the uptrend and hints at a continued move upward.
Wide Bearish Candles: Similarly, a wide down candle during a downtrend signals strong selling pressure.
Volume Candle Chart can also be used for day trading purposes where you need to act FAST.
This TradingView chart type is extremely good so you don't need to compare the traditional volume bars on the bottom of the chart.
IMPORTANT: You must understand the puppet master mentality, which gives you context.
*** EXTRA: You can use this theme color.
Daytrade
Look for support and resistance lines to help with daytradesI'm looking for a DT entry here on AMD but instead of entering prematurely and hoping it goes up, I'm waiting for bullish confirmation that will happen if bulls reclaim the resistance and use it as support. Meaning, it should shoot above resistance, then dip down to that line as SUPPORT. That would be my ideal entry.
Watch to see what happens here. Good learning experience even if you are not in the trade. You are welcome to use volume and moving averages to assist you with your entries.
NASDAQ:AMD
Day Trading vs Mid-term investments Day Trading 🌪️📉📈
Day trading involves buying and selling financial assets within the same trading day. Traders constantly monitor the market, aiming to capitalize on short-term price movements. 🕒⏰
👍 Pros:
Potential for quick profits with multiple trades in a single day.
High adrenaline rush and excitement from rapid decision-making.
👎 Cons:
Requires constant attention, often leading to stress and emotional fatigue. 😓
High risk due to rapid market fluctuations and trading fees.
Mid-Long Term Investments 🚀📈📉
Mid-long term investments, on the other hand, involve holding assets for an extended period, ranging from several months to years. Investors focus on the asset's overall growth potential and fundamental value. 📈💹
👍 Pros:
Lower stress and emotional strain as you have time to analyze and make informed decisions. 🧘♂️📊
Potential for significant returns through long-term market trends. 📈📈
👎 Cons:
Limited excitement in comparison to day trading, as it requires patience and discipline.
Requires a solid understanding of market fundamentals and long-term trends.
Why the Second Option Is Better Emotionally 😌
While day trading can be thrilling, it often comes with high stress and emotional tolls. The constant pressure to make quick decisions and the fear of missing out (FOMO) can lead to impulsive actions and losses. 😫
In contrast, mid-long term investments provide emotional stability. H aving a long-term vision allows you to detach from short-term market fluctuations and focus on the bigger picture. This patience and emotional balance can lead to more thoughtful investment decisions and better overall returns. 😊
Remember, successful investing is not a sprint but a marathon . So, consider the emotional benefits of mid-long term investments, and you'll find yourself on a calmer, more fulfilling financial journey. 🏃♂️🚀
Daytrade Review on the Hang Seng IndexI small trade today on the Hang Seng Index that turned out to be quick and simple with little to no pressure from the entry. Could have been a better exit but all up it was a good start to the day.
I will explain the price action for the Entry and the reasoning for the trade coming into the start of the session.
** If you like the content then take a look at my WEBSITE in the profile to get more daily ideas and learning material **
** Comments and likes are greatly appreciated. **
Stock Market Logic Series #4The Puppet Master in his best work.
Once you see him, you can't unsee him.
Whether you are a day trader or a stock investor, you should know where the bigger player that plays the stock intends to buy or sell the stock.
If he intends to buy the stock, the stock will eventually go UP.
If he intends to sell the stock, the stock will eventually go DOWN.
You should always have in mind the following perspective:
The bigger player AKA the Puppet Master, has unlimited amounts of money.
He controls the market. If you view the market in this way, you will get the insight that if you think of yourself as having unlimited money to use, what would you do???
- You should make an experiment in TradingView Demo, and play as if you have unlimited money. You will get a lot of insight to the mind of the puppet master, just from this experience only.
- You would try to buy out, all the other players and seduce them to sell the stock to you.
- You buy out other people, by increasing the price up by pressing on the ASK, so people will take small profits.
- You would try to shake out, using fear, to make other players sell the stock to you.
- You shake people out by stopping buying on the ASK, and only willing to buy what other people willing to sell, you have time, you know you at any time can move the stock up, no matter how hard it went down. You move the stock up at any time by pressing hard on the ASK buy button.
- Having unlimited money does not create stocks, it has to come from someone else. You need volume, so you could buy stock from weak players. As stated you have your ways of doing the above.
-There is no selling and buying simultaneously, you have your campaign of buying and then of selling. Never do both at the same time. You thinking big, making serious money from the markup and the markdown of the stock.
Once you understand this perspective, by looking at the volume, you can have a very good guess of what the bigger player or Puppet Master is doing. You see where he creates volume and where he has no volume, so he needs to respond (by buying aggressively on the ASK, and pushing the stock up).
Chart is also self-explanatory
Follow for more
Stock market logic, volume analysis, chart patterns :)
How to Day Trade or Swing Trade S&P500 Part 2Hey Traders,
So this is part 2 of the previous strategy I talked about with the stock indexes. I used to trade the Forex, Commodities, Crypto and other markets. But in my opinion these stock indexes are the best markets of the all to trade because they move daily with strong volume and give you multiple trading opportunites. So lets look at now how we can truly fine tune this strategy and turn it into a great method. In the future I believe I will only focus on trading the stock indexes S&P500, Nasdaq 100 and Russell 2000.
Enjoy!
Trade Well,
Clifford
How to Day Trade or Swing Trade S&P500 Futures No IndicatorsHey Traders,
So over the years I bout alot of courses about trading the markets. In one course I took I learned about a reversal strategy using candlesticks on daily charts. Although in the past I didn't consider myself a Day Trader I found this strategy to be appealing for it using the Stock Index futures. So now I sometimes do day trade the market if I get the right setup. The good thing about his strategy is that you only need to check the market once a day to see if there is a setup. Then you just place your stop orders and limit orders according to your risk management or you can also use options.
Enjoy!
Trade Well,
Clifford
AUDUSD Daytrade exampleAUD/USD long daytrade with thought process.
Explained the way timeframes in sync make a higher probability trade.
The Reason I don't recommend day trading stocks in Taiwan.Why I don't recommend day trading stocks in Taiwan?
"Using TSMC as an example for trading explanation"
Using a "valid", "stop-loss", "almost daily trading" short-term stock trading strategy for day trading or swing trading, the results are as follows:
1. Use a positive expected value trading strategy and follow discipline to take profit and stop loss.
2. Backtesting shows a substantial performance chart, 46 months, 527 trades, over five years +72%.
3. However, when you factor in the "0.4%" transaction tax + commission fee, you will find that you will lose badly. Why?
The reason is simple. 0.4% is very scary. If you trade 100 times, you will lose 40%. Will a person who trades every day trade 200 or even 300 times a year?
With 527 trades, your trading cost is 527*0.004 = -210.8%. Adding the +72% performance and subtracting the -210.8% trading cost, you will end up with a result of -100%, losing everything after working hard for four years without making any mistakes.
"If you are day trading stocks, I want to tell you to be clear-headed. The trading cost of day trading stocks is so cruel."
Choosing the right market, commodity, and understanding the rules of the game are essential!
For example:
Taiwan's stock trading tax is 0.1~0.3%, and commission fee is 0.1~0.3%
The US stock trading tax is 0.00207%, and commission fee is 0.1%~0.5%
Unless you are really skilled enough to overcome the trading cost. I do'nt recommend any traders to day trade stocks in Taiwan.
Feel free to share with those who need it to know.
DAY TRADING STRATEGY USING TOP DOWN ANALYSISIn this video i walk you through my day trading strategy from higher time frame to lower time frame.
In the video, you will discover;
How to day trade
How to analyze the market from a higher time frame to a lower time frame
How to pick the best trades that win.
How to mark your support and resistance.
How to follow the trend and many more.
HOW TO: Find the money making stocks, cryptos and FX pairsToday I'm going to be looking to something a little bit different than our normal analytics!
We're going to dive into the tradingview screener! The Forex Screener specifically, but everything I do talk about does also apply to the crypto Screener and the stock Screener. What I want to explain is how I use it to find pairs, stocks and cryptos which are setting up the way I want them to, in order for me to day trade. I show how I use a range of different Bollinger bands to moving averages to overall technical aspects, like growth statistics or reaching all time highs.
The Forex Screener and the tradingview tools that they offer is top of the range stuff. I recommend trying to figure out how to use them and how to utilize them to benefit you in your trading.
Have a listen. Have a look yourself through the Tradingview screener and the different technical aspects in which you can change. I guarantee it'll streamline your process in finding the right pairs that you're going to choose when it comes down to day trading.
I hope you enjoyed it. If you did, please leave a comment and a like. As always, have a very successful week of trading guys. Thank you.
10x Any Trading Account - Using MathTLDR: It's not as hard to 10x an account as it may seem. By using math, we can exponentially grow our account while also exponentially making it easier to grow (and also continue to minimize our risk).
So, I am planning on growing an account from 3k - 30k. This is no easy task, but I am going to break down why it's not as hard as you think. Math!
As the account grows, hitting 10% of the original amount each day will get exponentially easier. Here's an example
Day 1 : 3k to trade with means each daily profit goal is ~ $450 (Thats 3 trades of 25% profit using reasonable risk management. I'm going to break that down later, why this isn't actually as difficult as it it may seem to do consistently) Hint: 0dte
Day 2 : We now have $3,450 in the account. Adjusting the trading plan risk management to the new account size, this means the profit goal for today is now ~ $518. (see where this is going)
Day 8 : By now, the account is $7,854 and the profit goal the previous day was $1032. By following the same trading plan and carrying it over as the account grows, the profit compounds.
Now, this is great, but it could be better. To further reduce risk, instead of increasing the profit target with a larger buying power, we can instead play with the trading plan to make our chances of success even higher. Lets take a look at the variables affecting the profit in a trade, and we'll come back to this idea in the future. (edited)
In every trade, there are 3 main factors that affect how much cash you acquire. These are:
The total % of your account used in each trade
The dollar amount you use in each trade
The % of profit you attain from those two figures
The total amount of the account we use in each trade, the less % we have to make in each trade. (10% on a 500 play is 50 - Alternatively, 5% on a 1000 play is also 50.) This allows us to trade even in markets where this isn't much volatility. We can shorten the time we are in a trade, and the movement required on the chart, to hit our goal. (edited)
Also, there's one huge factor I am relying on. As the account grows, hitting 10% of the original amount each day will get exponentially easier. Here's an example > Day 1: 3k to trade with means each daily profit goal is ~ $450 (Thats 3 trades of 25% profit using reasonable risk management. I'm going to break that down later, why this isn't actually as difficult as it it may seem to do consistently) Hint: 0dte > > Day 2: We now have $3,450 in the account. Adjusting the trading plan risk management to the new account size, this means the profit goal for today is now ~ $518. (see where this is going) > > Day 8: By now, the account is $7,854 and the profit goal the previous day was $1032. By following the same trading plan and carrying it over as the account grows, the profit compounds. Now, this is great, but it could be better. To further reduce risk, instead of increasing the profit target with a larger buying power, we can instead play with the trading plan to make our chances of success even higher. Lets take a look at the variables affecting the profit in a trade, and we'll come back to this idea in the future. (edited)
So back to our little example. Instead of increasing the goal each day, it would be wiser to adjust our trading plan to allow for more attempts (using less % of total BP per trade) or for higher success rate (5% profit per trade instead of 25%). This means that as our account grows, the effort will go down as success probability rate increases - exponentially.
This is where it all comes together. By day 10 of making $450 per day, we would have $7,500 in the account. We would effectively be doubling the amount of trades we can make (10% of the account per trade instead of 20%) and cutting the %gains needed per trade (from 25% to 20%).
We can now afford to lose more often, as we have more buying power. Because we can afford to lose more often, we can also afford to tighten our stops losses, minimizing the risk per trade. Also, we now have much more opportunity to slip into more trades, as our %gains needed decreases each day.
(As another method, this can be played with to your liking and manipulated differently depending on how you feel that day, once you get comfortable enough with your trading plan. So maybe you don't have to trade every day, and you take advantage of the compounding profit effect in the later stages. Say maybe, 5x into the 10x challenge. (15k out of a 3k - 30k challenge.)
This is also how the "rich get richer". As your capital grows from initial investment, it becomes easier and easier to make profits in comparison to that initial investment.
Day Trading Strategies📊 Day Trading Strategies 📊
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Day traders use numerous intraday strategies. These strategies include:
🛑 Scalping: This strategy attempts to make numerous small profits on small prices changes throughout the day.
🛑 Range trading: This strategy primarily uses support and resistance levels to determine buy and sell decisions.
🛑 News-based trading: This strategy typically seizes trading opportunities from the heightened volatility around news events.
🛑 High-frequency trading (HFT): These strategies use sophisticated algorithms to exploit small or short-term market inefficiencies.
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What is Day Trading ?
📊 What Is Day Trading ? 📊
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Day trading usually refers to the practice of purchasing and selling a security within a single trading day. While it can occur in any marketplace, it is most common in the foreign exchange (forex) and stock markets. Day traders are typically well-educated and well-funded. They use high amounts of leverage and short-term trading strategies to capitalize on small price movements that occur in highly liquid stocks or currencies. Day traders are attuned to events that cause short-term market moves. Trading based on the news is a popular technique. Scheduled announcements such as economic statistics, corporate earnings, or interest rates are subject to market expectations and market psychology. Markets react when those expectations are not met or are exceeded–usually with sudden, significant moves–which can greatly benefit day traders.
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[Trade Review]How I traded $SQ, $HD HUGE FUMBLE, $TLRY, $MSFT, $In this video I will reviewing trades I took on June 29, 2021 which were $SQ, $HD, $TLRY, $MSFT, $baba Along with an explanation of my plan as well showed you guys my TA for some possible set ups! Traded these tickers using my knowledge of technical Analysis , sharing my levels: Support & Resistance , my trendlines , Fibs, Waves, Price Action, Channels , Emma's, and prior experienced , while providing both bullish & bearish scenarios for you to be able to understand my analysis and wait for confirmation as always!
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NZD/CHF Long - 21 May 2021 | Hybrid Move Result: -1.00%Hey All,
The trade initiated from a Daily Counterzone stacked with a clean area of weekly demand as well perfect in my opinion with the main idea to break the daily trend and
continue the higher-timeframe bias to the upside. Overall the setup was pretty complex due to the Counterzone analysis, yet clear enough to find and edge.
The 4hour strategy was executed after price formed a clean star formation and exploded to the upside after some more deceleration. The 4hour started to create a small double bottom formation
with our automatic Hybrid Strategy entry when the 4hour star closed. At the daily time-frame prices reached the downward sloping trendline formation which was never broken to the upside, instead
price moved towards the downside creating a deeper daily lower low and continue the trend.
Good trade, good edge.
Day trade reversal setup using Hull MA - over shoot!Hello, Traders around the globe,
Here is a reversal pattern of the Hull Moving Average.
Stage #1: You want to see an acceleration of momentum = the blue crosses have spaces inside them.
This stage is important because if you are doing day trade, you want to be sure that you are in a volatile environment.
You don't want to be where the market is choppy with zero range! .
This stage gives you the "flag" that the stock has a potential day trade opportunity.
The probability of you guessing the exact day that the stock will explode is low, that is why you wait for it to explode and trade the intraday reversal...
Stage #1 EXTRA: Now you know how to detect momentum opportunities, and can go into a lower timeframe and trade the continuation of the acceleration of momentum move... but this is for another post.
Stage #2: You want to see the Hull ma go above the price action = the OVERSHOOT!
Once you see that the Hull is crossing the price that means that momentum is running low ---> reversal is coming... (stage #1 made sure we are volatile, now we want to be sure we are overextended and momentum dries out!)
When the HULL moves above the highest high of the move, OVERSHOOT PHENOMENA, it means that the price got really overextended.
The HULL MA is trying to decrease lag, so it "anticipates" the direction, it gives chance for the price to correct to the right direction. If a strong move happens, the HULL expects it to continue, so it will rise above the high of the price movement, "hopeful" that the price movement will continue in its same momentum and force. since it doesn't... overshoot happens, and a reversal is likely to follow through.
Stage #3: You want the slope of the Hull ma to change direction, then you look for your personal reversal setup.
Overextended can become even more overextended, so it is better to be a little late, and be right, than trying many times to catch the TOP and be discouraged, which will make you miss the move!
Ideally, you want the HULL to be SYNCED :) If the HULL is SYNCED that means that it gives the best representation of the price action.
It is hard to sync the moving average every time, the market is changing...
It is easier to be able to recognize when it is synced and when it is not ===> That way, you know when you have better odds of it being accurate.
Granolabar's Gap and Crap principles TESTED (2/26 Trade Recap)Introduction
In this post, I explain how I utilized the Gap and Crap principles to trade SPY on February 26th, 2021.
Recently, I made a post titled "Granolabar's Gap Down Guide (my own style)." The post is linked below. In it, I outlined my strategy for trading gap downs. I highly recommend you read that post before this one to understand the references I am making.
In the post, I detailed a specific way to trade gap downs using a system of candles and EMAs. The most important part of the strategy is not necessarily the gap down aspect but the conditions I used to determine entries. Specifically:
--------
"To know when to enter the trade, I watch the candle sticks. First, there must be a 5 minute candle that closes below the premarket low. Then there are two possible scenarios from here.
Scenario 1, the next candle immediately pushes below the low of the first candle. In this case, you would take puts or sell short as soon as the second candle breaks the low. My reasoning for this is that if the movement is strong, the second candle would not hesitate to make a new low. It is better to enter on the break than to wait for the candle to close and miss out on potential profits, which are often pretty sizable when things are moving quickly. Notice in the below example that had you waited for that candle to close, you basically would have missed half of the entire fall, which lasted 4 5 minute candles.
Scenario 2, the next candle does not immediately push below the low of the first candle. In this case, you would wait until there is a candle that closes below the low of the first, instead of merely making a new low. My reasoning is that if the momentum is not strong enough for the second candle to immediately make a new low, the confirmation candle to enter needs
to be more definitive. The play is not invalidated because the first candle closing below the premarket lows indicates that there is downwards pressure. In this way you minimize the likelihood of shorting a bear trap while also capitalizing on the fall."
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I will proceed by explaining my thoughts on exactly what was going as I was watching the market.
(Note: stops at entry means that I set a stop loss at the price I originally purchased the option for, meaning that it will sell for breakeven price. This is important later on.)
Trade 1:
After getting on Tradingview in the morning and opening up the 5 minute SPY chart, I quickly noticed that SPY did not move at all overnight. Despite the lack of a gap, we could still trade with similar principles. I first drew the resistance at premarket high (yellow) and premarket low (blue) as well as a minor support (white). Identifying these support and resistance levels, as well as any applicable trendiness, are an important part to trading successfully. Keep in mind that the cleaner these lines are, the better they will act as critical levels.
The first few candles after market-open were just chopping between the minor support line and the premarket high; nothing closed above or below either, so there was nothing to be done there. Do not force a play!!! You do not always have to be doing something in the market. Oftentimes sitting on your hands is the best thing to do.
The next candle is when I went on high alert mode. It ended up not only closing under the minor support from premarket (that happened to hold for the first 20 minutes of the trading day), but it also closed below the 50 EMA. At this point, I was just waiting for the next candle which immediately pushed below the low of the first candle, giving the entry signal (Scenario 1). For this play specifically, I kept my stop loss at the premarket high (good resistance) and my target was the premarket low since there wasn’t any major support until then. Once SPY hit the premarket low, I scaled out most of the position and left stops at entry for the rest.
Trade 2
The next play came immediately after when the following candle closed right below the premarket low. This candle was followed by a slight pullback, so my conditions for entry changed to a new candle closing below the previous low (Scenario 2). To remind myself, I marked the bottom of the break candle with a white line. This image was from that moment and shows exactly what I was thinking (I don't have the replay feature for any timeframe less than the daily).
A few candles later, a candle closed under the break low. This marked the entry of a short position, with the stop loss set at the premarket low (blue line) since it previously acted as a critical level.
I decided to start scaling out after seeing a small inside bar green candle, which is typically a reversal pattern. Since I took profit on part of the position, I made sure to set stops at entry for the remaining position. This ensured that the play finished green; it is not worth it to risk the remaining position going negative and cancelling out the gains. If the market takes another turn down from there, just consider reentering a new position. I will continue reiterating this concept since it is crucial for this fast paced trading style.
Trade 3
After exiting trade 2, I did not play the break of the premarket low from the bottom up, but it would have been a good scalp also. Theoretically speaking, this was how it would have played out if the rules were followed.
The play I did take, however, was the break of the premarket high a little later. Again similar principles: closed above the line, the next candle immediately pushed higher (Scenario 1), and the stop loss was a clean break of the 34/50 cloud on the 1 minute chart. In this play, I scaled out due to a red inside bar; again, I left stops at entry after scaling out the first time to ensure the play stayed profitable.
Trade 4
This trade was a slight change of pace; I ended up playing a falling wedge breakout with the same principles. I saw that SPY was forming a clean wedge with the top and bottom trend lines both having 3 solid touches each. The plan was to wait for a break of the 50 EMA (top of the blue cloud in this case) since it typically acts as a support/resistance. The stop loss was a clean break of the 34/50 ema cloud on the 1 minute chart, and the price targets were the white and yellow lines from premarket. As soon as it hit the first price target, I scaled out half the position and set stops at entry to lock in gains. The rest were sold at the second price target since the stops were not triggered beforehand.
Right at breakout view:
Nearing PT 2, premarket highs:
To play devil's advocate on my own plan, I am asking myself why I did not sell the position at the 2:44 PM ET 1 minute bar (the 13:44 bar on my chart above). The candle was fully below the 34/50 EMA cloud and had pushed below the previous "break" candle's low for a second. While those are valid points, it did not satisfy my stop loss conditions. I wait for the second candle after the “break candle” to close below the first candle's low on the 1 minute, which this candle did not. Additionally, it ended up closing as a hammer which is typically a bullish sign.
After that fourth play, I did not take any more positions for the day. Typically, the last 30-45 minutes of the day are very volatile, especially on a Friday, and it can be very risky trading in that environment. The options that I typically play expire within an hour of close; any misplay will lead to 50%+ losses instantly. However, if I am in a position that goes into the last 30-45 minutes of the day, I will not close it just because it hit that time of the day.
Conclusion:
I hope you enjoyed this post; it may have been a little lengthy again, but I wanted to detail exactly how I used the principles that I devised to trade.
There are 3 key takeaways:
1. The candle stick rules I use to decide when to enter a trade is a good way to catch breakouts while minimizing fakeout risk. It may mean that your entry is not exactly the first bar of the breakout, but the additional safety will help the majority of the time.
2. The rules I devised in scenario 1 and 2 are not limited to Gap and Crap setups. I will use them on whatever a clear breakout opportunity presents itself, including ascending triangles, bull flags, bull pennants, symmetrical triangles, falling wedges, cup and handle, inverse head and shoulders, etc.
3. Always make sure you set stops at entry if you reach a take profit level and sell a portion of your contracts.
If you have any questions, feel free to leave a comment. I will try to read all of them :)
Have a great day and I wish you well.
-Granolabar
Granolabar's Gap Down Guide (my own style)Introduction
Within the past week, AMEX:SPY has become increasingly volatile, with massive gap ups and downs
followed by all day runs extending more than 3% in either direction. This is apparent with a cursory glance at the following chart.
With this volatility comes uncertainty, especially for those who are swing trading on the timeframe of a few days to a few
months. However, we can use this increased volatility to our advantage. i am going to introduce my way of trading these days,
particularly the ones involving gap downs.
Identifying the Setup
Identifying the setup is relatively simple, but there are a variety of factors that can improve your chances of success.
Firstly, the stock needs to have gapped down overnight. This one is quite obvious and easy to identify; look for a literal gap in
the prices going from after hours to premarket, like those identified in the following chart of SPY.
Secondly, there are a few things that can improve the chances of this strategy playing out. For example, if the stock recently hit
a supply zone and rejected, the gap down is more likely to be followed by more downside as the stock is already in "pullback
mode."
Additionally, trendlines are another great thing to keep in mind. For example, SPY recently hit a nearly 4 month long strong
trendline and rejected. Generally speaking, the larger the timeframe that the trendline is identified on and the more "touches"
it has, the stronger it will be. I often find it useful to work my way down from the 1 month or 1 week chart down to the hourly
to identify trendiness that I need to keep in mind.
Trading the setup
To trade this setup, I like to primarily stick to the 5 minute chart. The one minute chart has too much noise, while the 15 minute
takes too long for confirmation that you would miss a sizable amount of the move.
Once you are on the 5 minute chart, draw a horizontal line at the bottom of the premarket low, as shown below. This will be the
critical value to watch. Theoretically, you want to enter when that line breaks , BUT there are often fakeouts
around these critical levels.
To know when to enter the trade, I watch the candle sticks. First, there must be a 5 minute candle that closes below the
premarket low. Then there are two possible scenarios from here.
Scenario 1, the next candle immediately pushes below the low of the first candle. In this case, you would take puts or sell
short as soon as the second candle breaks the low. My reasoning for this is that if the movement is strong, the second candle
would not hesitate to make a new low. It is better to enter on the break than to wait for the candle to close and miss out on
potential profits, which are often pretty sizable when things are moving quickly. Notice in the below example that had you
waited for that candle to close, you basically would have missed half of the entire fall, which lasted 4 5 minute candles.
Scenario 2, the next candle does not immediately push below the low of the first candle. In this case, you would wait until there
is a candle that closes below the low of the first, instead of merely making a new low. My reasoning is that if the
momentum is not strong enough for the second candle to immediately make a new low, the confirmation candle to enter needs
to be more definitive. The play is not invalidated because the first candle closing below the premarket lows indicates that there
is downwards pressure. In this way you minimize the likelihood of shorting a bear trap while also capitalizing on the fall.
Let's Talk Take Profit and Stop Losses
Now that you have successfully entered the position at an optimal place, the next thing to consider is where you want to exit,
whether that is to secure the tendies you just made or protect yourself from further losses. Note, this part is completely up to
you and your risk or reward tolerance.
Assuming that it all goes to plan the the stock starts to fall:
I typically trade weekly options for this kind of play, as it is a short term play. Because options premiums move quickly in both
directions, I will take profit at 25% with about half the position if the candles are getting smaller, indicating that the trend may
be weakening. Then I will set a stop at open, meaning that I will sell the remaining portion of the position if the contract goes
back down to my purchase price; this guarantees that ultimately the play is profitable.
However, if the candles stay rather large, I will hold the position until the candles do start to get smaller, and sell half the
position there, often around the 50%, 75%, or 100% profit mark. If the option does hit 100% profit, I will almost always sell half,
with very very few exceptions. This ensures that even if the other half of my position expires worthless(worst case scenario), I
come out of the play completely unscathed.
If the play does not go according to plan:
Let's assuming that right after you enter based on the conditions above, the stock reverse to the upside. Now the question
becomes, when do you sell to prevent yourself from taking major losses. For this I use my EMA clouds, or simply just EMAs with
the region between the lines shaded in. I typically have a 5/12 EMA cloud (green) and a 34/50 EMA cloud (blue).
As soon as one candle closes above the 5/12 green EMA cloud on the 5 minute chart , and the next candle closes
above the first candle, that Is when I take the loss and move on. Often times, when playing this strategy, the price will come
back up and retest the break line; do not panic if the position is immediately red, but also stick to the stop loss rules mentioned
above.
This cloud strategy also applies to closing the last half of the profitable position mentioned above. When you are left with half a
position at 100% profits or more, I will wait for reversal to sell. The reversal tends to happen when one candle closes above the
34/50 EMA cloud on the 1 minute, and the next candle pushes past the first high. There are also many other ways to market the
bottom, such as bullish divergence, engulfing candle, abandoned baby, etc.
TLDR
This is my way of trading gap downs that utilizes candle sticks and the EMA clouds to determine Stop loss or Take Profit places.
Simply put, buy puts when the price cleanly breaks the premarket low, ride with the clouds until they suggest a reversal or
hit a stop loss point.
if you have any questions or comments, please feel free to let me know. I would love to hear other perspectives or criticisms.
Also, the "clouds" are just EMAs filled in with crayons, but if you want the script, it's in my profile.
My Futures Trading Intraday Chart Setup For Success! ENA lot of people have emailed us in asking for our Trading View Intraday chart setup and workspace so we wanted to post some ideas here to our Trading View Followers as well. We will be breaking down each individual indicators we use such as Weekly, Daily Levels, Initial Balances Zones, VWAP, Time Frames, Market Internals and Volume Profiles to have a confident edge in your trade setups.
Should You Start Day Trading? Here Are The Pros and ConsShould You Be Day Trading?
In this article, I’ll show you the pros and cons of day trading so that you know exactly whether or not you should consider it.
Because these days, day trading is super popular. And there are several advantages to day trading, but there are also some challenges.
The 4 Pros of Day Trading
So let’s first go through the pros of being a day trader, then we’ll dive into the potential cons.
Well, first of all, what does it mean to day trade?
Day trading means that you are opening and closing a position within the same day. In many cases, traders will hold positions for just a couple of minutes.
That’s what most day traders do. When I’m day trading I’m typically holding a position anywhere between 3 and 20 minutes. So that is very typical for day traders.
So what are the pros of day trading?
One: You will see instant results
First of all, it’s fast and you will see instant results. And what do I mean by instant results?
Well, within a few minutes you already know whether you’re right or wrong, because either the trade moves in your direction and you’ll be able to make a profit, or it moves against you.
So at the end of the day, after you have done some day trades you already know how well you’re doing, right?
This brings me to number two…
Two: You don’t have overnight risk
Whatever you realize by the end of the day is in your account. So therefore, the results are more instant.
Consider swing trading for a moment.
You see, the way I swing trade, I’m in a position typically between 5 and 20 days. So this is where you need to give the trade some time to develop.
And this is where you will see some ups and downs and you don’t see instant results that you do with day trading.
Also with the overnight risk, as you know, right now markets are moving crazy, and some people love to not have overnight risk because you don’t know where the markets will open in the morning.
Let’s take a look at this right now. So today, you can see the markets were opening.
And if you look at stocks like Kodak, for example, it suddenly opened way higher overnight.
Another one is ADT, that recently opened with a huge gap.
Now, obviously gaps can work in your favor as well as against you. Let me give you an example of one that might be working against you, Intel.
So this is Intel, and as you can see, it was nicely trading between $60 and $62. Then suddenly it plummeted down to $50.
So as you can see the charts showed a long signal, then Intel fell out of the sky after their earnings report.
These are the types of things you will avoid when day trading.
Three: It’s an adrenaline kick
It definitely is an adrenaline kick, right?
I mean, you know that you can make hundreds of dollars, maybe even thousands of dollars depending on your account size in a matter of minutes.
So it can be very addictive here. It definitely gives you the adrenaline kick and this is why people love day trading.
But although it may feel good, being all jacked up on emotions is not a recipe for consistency when trading.
Four: There is no overthinking
The other thing with day trading, there is no overthinking and here’s why.
When day trading, you have to make a decision in a split second. I mean, the markets don’t pause for you.
The markets are moving, so the markets are moving quickly, and when you see an opportunity you need to jump on it right away.
And this is why some people love day trading, because this way they don’t have the tendency to overthink.
With day trading, it’s really hard to overthink things. With day trading there’s no analysis paralysis because if you snooze, you lose.
So these are the the four major pros based on my experience that I see. And at the beginning of my trading career, I used to day trade a lot.
These days, after many, many years of trading and as I’m getting older, I prefer swing trading.
The 5 Cons of Day Trading
Now that we’ve talked about the pros of day trading, let’s discuss the cons because there are some key disadvantages that may make you think twice about day trading…especially if you’re new to trading.
One: It might require $25,000
When day trading, it might require $25,000 to day trade.
Now, why do I say it might require $25k?
First of all, this is only true when you’re trading stocks and options, and it is only true when you’re trading in a margin account.
If you’re trading in a cash account, the pattern day trading rule does not apply.
So again, $25,000 for you might not be a problem, for other traders they may struggle to come up with it.
Two: A smaller stop means smaller profits
Another con is that you can use a smaller stop, but with a smaller stop it also means that you will have smaller profits.
Now, let me explain this to you, because this is where I want to spend a minute and show you exactly what it means.
Some people don’t understand this relation, so I want to go to the charts and take a look at Microsoft.
So Microsoft jumped today (at the time of writing this).
Now, at the very bottom here, you see an indicator that is called the average daily range.
What does the average daily range mean?
The average daily range means how much does a stock move on average from the high of the day to the low of the day.
And right now, the average daily range in Microsoft is $4.60.
So this means that when you are swing trading, your stop loss, of course, needs to be at least $4.60. Otherwise, you will get stopped out.
Now, here’s a rule of thumb that I personally like to use: If I use this as a stop loss, I want to see twice as much as a profit target.
So here in this case, I’m looking for two times the stop loss as my profit target. So this means my profit target is $9.20.
Now, if you are only trading 100 shares of Microsoft, then you know this is per one share. It would be $460 dollars as a stop loss on 100 shares, and $920 as a profit target.
Now, let’s take a look at a five minute chart.
Here you see a five minute chart from today.
If you’re trading on a five minute chart, let’s say that you’re trading the breakout above, let’s say $214.50.
Where would you place your stop loss?
You can place your stop loss at around $213, so it’s a rather tight stop not giving you much room. So this means your stop loss is only $1.50.
But this is where you get the idea, if you’re applying a stop loss of only $1.50, you could only make around $3 because we have barely scratched $217 here.
It is very, very important that you understand: The smaller the timeframe, the smaller your stop loss, and therefore the smaller your profit targets.
Keep this in mind.
Three: It can be very addictive
Now, what is another con of day trading? Well, it can be very addictive.
Day trading for some people, it’s almost like a slot machine in a casino.
I’ve seen people wiping out their account because they got addicted to day trading.
When you’re swing trading, like I prefer doing these days, you only place a trade a day and after this, you’re done and you can relax.
Four: You have no time to think
Another con is that you have no time to think.
And again, this can be a pro because you can avoid overthinking but it also leads to impulsive trading.
And this is what I see many traders are doing, especially day traders, that they are trading impulsively.
Because they see that the market starts moving and now they are scared that the market might run away.
This is sometimes where FOMO (Fear Of Missing Out) kicks in.
And so they quickly buy, and they often buy at the high.
So no time to think can be a pro, but it can also be a con because this leads to impulsive trading, and typically, impulsive trading never worked for me.
Five: The risk of overtrading
So let’s talk about a fifth con that I see here, and this is the risk of overtrading or also revenge trading.
What do I mean by this?
Especially when a day trader starts in the morning and has a few losing trades here, the trader might say, “Oh, if I just trade more, I will make back the money that I lost.”
Now I don’t know about you, but what I experienced when I was overtrading or revenge trading, usually when I had a bad day, it just got worse.
And this is where I see many day traders wiping out their account by just overtrading, revenge trading, and doing a lot of impulsive trading here, and doubling down.
Summary
These are the main pros and cons of day trading that are based on my own personal experience.
When is day trading for you?
Well, I want to say day trading is not for you if you like to analyze your trades and think about it before you enter.
So if you want to take some time and say, “Alright, let me take a look at the trade and think about where will I placed my profit target and my stop loss” then day trading is not for you.
The markets don’t pause for you, the markets just keep moving. And especially these days, the markets can be moving fast.
Day trading is also not for you if you might have an addiction problem. And hey, you know yourself best, right?
I mean, do you think that you could get addicted to day trading? Most people can, and no addiction is a good addiction, right?
Now, lastly, day trading is not for you if you easily get stressed or overwhelmed. Again, you know yourself better.
Day trading is super fast, it’s like driving on the German highway at 180 miles per hour. If you’re an experienced driver, it’s fun. But if you easily get overwhelmed, then day trading might not be for you.
If you know anyone who is considering day trading, or analyzing the pros and cons, please feel free to share this article.
The Stigma of Options Pattern Day TradingIs there a pattern to your trades?
Anyone trading options knows how little effort it takes to build up a healthy volume of transactions. But you should be aware of one rule that could inhibit your ability to trade options too often in a margin account.
In the past, day trading represented the wild west of the market. It was possible for day traders to move in and out of positions within the trading day and end up with no open positions. Margin is calculated as of the ending positions in the trading day; this meant it was possible to trade on large volume with little or no cash at risk, meaning no margin requirements. It also meant huge risks for brokers.
Trading on extreme leverage is attractive, but it is not the only motive for day trading. Many traders believe that the risk of price gaps between today’s close and tomorrow’s open are simply too great; day trading enables traders to close out positions during the trading day, avoiding this risk altogether. Even so, if you want to day trade, you could fall into the definition of a “pattern day trader.”
Entry and exit decisions are based on momentum, chart patterns, and other technical strategies. Whichever strategy employed, the theme to day trading is that positions are opened and closed before the trading day’s end. This problem, at times representing unacceptable risks to brokers as well as to traders, is what led to the enactment of new rules concerning so-called pattern day traders.
By definition, a day trade is when you buy-to-open and sell-to-close or sell-to-open and buy-to-close the same option within the same market day. A pattern day trader is when this action is repeated four or more times within five consecutive trading days using a margin account. If you fall into this definition, you must maintain at least $25,000 in equity balances (cash and securities) in your margin account. This balance has to be on hand before you can continue any day trading. You can also be labeled a pattern day trader by your broker if your broker believes there is a strong likelihood that you will day trade.
One exception: If your day trading is lower than 6% of the total number of trades you make in the five-day period, then you are not considered a pattern day trader. So, high-volume traders can escape the rule under this provision.
Once you have been labeled a pattern day trader, you will need to maintain at least a $25,000 equity value in the account . If your account falls below $25,000, it will be frozen from day trading until the account is restored to the minimum equity requirement of $25,000.
Example of day trading:
8/18 10:10 AM BTO AUG-21 TSLA 1900 Call
8/18 10:50 AM STC AUG-21 TSLA 1900 Call
This is a day trade. The position was opened and closed in the same trading day.
Example of not day trading:
8/17 3:50 PM BTO AUG-21 TSLA 1900 Call
8/18 10:50 AM STC AUG-21 TSLA 1900 Call
This is not a day trade. The position was opened and closed on two different trading days.
Example of Pattern Day Trading:
8/13 Opened and closed an AMZN Put
8/13 Opened and closed a GOOG Call
8/17 Opened and closed a BKNG put
8/18 Opened and closed a TSLA call
This is pattern day trading. There have been four day trades in a five trading day period. Trading days do not include weekends for stock/index/ETF options. If instead of taking the TSLA call on 8/18, the position was day traded on 8/21, this would not have been classified as pattern day trading. This is because the fourth day trade, TSLA, would have been over five business days away from the first day trade on 8/13. See below:
8/13 Opened and closed an AMZN Put
8/13 Opened and closed a GOOG Call
8/17 Opened and closed a BKNG put
8/21 Opened and closed a TSLA call
This is not pattern day trading. Assuming no day trades were placed prior to 8/13.
The pattern day trading requirements is one of those unexpected surprises many traders discover in their margin accounts. The rules are easily understood in hindsight, but unfortunately, they are likely to come to your attention only after you fall into the zone in which they kick in and apply to you.
Individual brokers may have more strict rules regarding pattern day trading. For example, one broker may view the opening and closing of a vertical debit spread as one day trade, while another broker may view the same action as two day trades, since a spread has two different options. It is always important to contact your broker to understand how their day trading rules apply to you and your account. They will also have a record of your current day trades. If it is posted on your platform, make sure you know how to locate the day trade count if you intend to avoid being labeled a pattern day trader and are looking to stay at three day trades or lower in a five trading day period.
GBPUSD 1:2 RR - Whats your edge in the market?Hi,
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