Day Trading Technique: Buying Lows & Selling Highs

– How do we buy the lows and sell the highs

o Step1 = define your sideways range

 Auto levels indicator does this for you
 Look for 2-tops and bottoms as easy targets for the highs and lows

o Step2 = look for the test of the highs/lows

 Needs to be as close as possible
 Avoid the middle of the sideways range

o Step3 = begin to look for the 3 signs of price reversal

 Slowing speed of the tape
 Momentum curls against the short term trend
 Big MONEY buyers/sellers against the short term trend

o Step4 = enter with confidence when you see the swing high/low broken to trigger your entry.
o Patterns we use

 2-step reversal
 Breaker
 Wave

o We use the auto-levels to find these highs and lows
o What indicators to watch

 Pace of tape
 Auto levels
 Time & sales
 Momentum
 Look for swing highs/lows for my entry

– Benefits of the filtered time & sales compared to the unfiltered T&S

o Filtered time and sales shows us the big money in the market

 Filter = 5 contracts
 ES / FESX / ZN = 20 contracts
 Used to determine my entries, exits

o Unfiltered shows us all the orders coming into the market

 Tells me the exact price levels we are trading at
 Also shows me SPEED of the orders coming into the market

• Used with the pace of tape indicator

– Using the MACD indicator

o Used for exits, never for entries
o Used with my trade management chart
o I watch the zero-line to see if the histogram is above/below the zero

 If its below, I want to flatten my long trade
 If its above, I want to cover my short

– Trade Management Strategies
o Scalpers have standardized trade management, always the same
o Day traders & Swing Traders will use different trade management depending on the market structure

 Use highs/lows for my stops and targets.

– What do we look for at 10:30 for the reversal?

o Watch the e-mini’s they are the ones with the best 1030 reversal
o Locate a major level of support/resistance
o Wait for price to test that level around 1030 (as early as 10am, late as 11am)
o Once you see the test, look for the 3 signs of price reversal

 Slowing speed
 Momentum curls against short term trend
 Big money buyers/sellers against short term trend

o Use a 2-step reversal pattern to sell the highs or buy the lows, and if you miss the reversal, you can get in with a breaker or a wave pattern assuming it sets up.

– Different ways to find potential profit targets

o Fib Levels
o AB=CD Pattern