Double-Tops & Double-Bottoms make trading easy; Dollar Index Futures Correlation; Live Euro Futures Day Trade

One of the most important things to being a day trader is to be aware of your surroundings.

It only takes a few minutes for a trade pattern to trigger, so we must be aware above and below us at all times.

I have found that most day traders use double-tops and bottoms incorrectly, and in today’s video we will discuss the many ways we use these to profit consistently every day we trade.

– We have a great video on our blog, look under trade room resources on the blog

– Or Follow This Link, Click Here For Double-Tops/Bottoms Video

– We mark them on our charts and we try to avoid trading around these areas.

– These areas are frequently a location where the buyers and sellers are competing over control of price.

– Use them to define the top and bottom of a sideways trading range

– How do we make money with double-tops?

o We need to avoid trading around them, capital saved = capital earned
o Double-tops, I will look for a reversal off the highs using a 2-step short
o Double-bottoms, I will look for a reversal off the lows using a 2-step long.

Dollar Correlation to the markets we trade (DX)

– Click Here For a Detailed Article Explaining The Dollar Correlation

– Dollar is the reserve currency;

– it’s the denomination currency,

– the dollar leads it all!

– Negative correlation to EVERYTHING when it applies to the dollar

o Why? Because when you sell Gold Futures its settled in US Dollars
o If you buy crude oil futures and liquidate your long trade, taking profit, you will be paid in US dollars.
o Euro, Pound, Yen Futures are ALL settled in US Dollars.

– Euro begins to rise, and we see buyers on the tape

o Buying the euro

 In theory they are short the dollar

– How do we make money with this?

o Watch closely with the currencies

 Euro, Pound, Yen, Aussie, Canadian Dollar

o If dollar is sitting on support = resistance on the currencies
o If dollar is at support, im looking SHORT on the currencies

 Example: today’s Euro trade we saw the dollar index sitting on support
 This tells me SHORT the Euro
 Im long the euro at the time, so I take profit here.

o Ideal entry pattern:

 Dollar @ support

• Short the currency future
• 2-step short on the Euro @ HOD (example)

 Dollar @ Resistance

• Long the currency future
• 2-step long off the LOD on Aussie (example)

The difference between these types of TRADERS…

– Scalper

o Taking small moves multiple times a day
o 10+ trades per day
o Tight stop and tight targets get in and get out!

– Day Trader

o Looking for the intra-day moves
o 5-8 trades per day
o Tight stop and tight targets, but we look for a runner to maximize our trade potential (4/8/Runner)

– Position Trader

o Looks for multiple day moves, but does not hold overnight
o 1-3 trades per day
o Wider stops and wider targets, but the same low risk/reward ratio
o Low risk/reward means it is NOT higher risk than being a scalper or day trader
o Wider stops = more risk per trade, but wider targets = more profit.
o Example: 21-range trading method (slower timeframes)

– Swing Trader

o Uses weeks and months of price data to make educated decisions
o Look to trade the larger moves of the market
o Hold the trades for day, weeks, months, even quarters.
o VERY wide stops and VERY wide targets
o More risk per trade, but also more profit per trade, so the same low risk/reward ratio
o You will need a larger trade account
o You will also need to have a lot of patience

 These are not going to move quickly, they will take days, weeks, and months to play out sometimes.

Different Chart Types:

– Time: each bar x amount of time per bar
– Tick: each bar X amount of ticks per bar
– Range: each bar x amount of trading range per bar

o Unlike time-based charts or tick charts, range charts only move when we see more trading range.
o I like additional trading range because that’s how we make money. We don’t make money trading sideways, the price needs to rise or fall.
o Range chart is the only chart that will ONLY move when price rises or falls.