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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