Day Trading Strategies

1. Price action
2. Technical indicators
3. Candlesticks and chart patterns

Another point to remember is that in the market right now, over 60% of the volume is algorithmic high frequency trading. That means you are trading against computers. The majority of changes in stocks that you are seeing simply the result of computers moving shares around.

Trade Management and Position Sizing

    It is important to understand order entry, exit, position sizing and trade management.

Two traders enter into a trade based on one strategy. The positions go their way and then pull back a bit. The first trader fears losing their gain and takes a quick, small profit. The second trader adds to the position on the pull back and books a large gain. Same idea, different outcomes, all as the result of two different mindsets and trade management styles.

    Managing trades is the key to success. Trade management is referring to what you do with the position after you've entered it and before you've exited it.

    Novice traders believe that when they enter the trade, they should not do anything else but patiently wait for the price to hit their profit target or stop loss level. This is the opposite of what professional traders do. When you plan for the trade and enter a position, you have a minimum of information regarding the market and the validity of your idea. As the market moves after your entry, you will receive new price action and data about your initial trade idea. The price action of the stock will either be supporting or not supporting your reasons for being in that trade. Therefore, you need to manage your open position.

    for example, if you are expecting a break from a strong support level to the downside, and you want to profit the move to the downside with a short position, you may want to start with shorting 100 shares. Momentum scalper traders will usually start scalping when the level breaks to the downside.

    Trade management means that you have to be actively engaged in processing information while the trade is on, not just watching your position or moving away from your computer hoping your profit target order hits.

Trade management requires experience and real time decision-making.

    Position sizing refers to how large of a position that you take per trade. Some trades are so obvious that you can take a huge position or, as some call it, "load the boat". These setups are shouting "grab me by the face". Some trading opportunities are attractive enough for a "large" position. In other trades, you just want to go for a "taste" and perhaps add more later. Learning when to have the most size is a skill that new traders must acquire. Poor position sizing can lead to inconsistent results. But no matter how good of an opportunity, you may not risk more than 2% of your account in one trade.

Live to trade another day.

You can make a lot of money trading in and out of an active stock with small size. Likewise, you can lose a great deal of money trading in and out of an active stock with too big of a size. For example, for low float stocks that can move 10% or 20% in a matter of seconds, never take a large position, even though their sufficient buying power for a very large position.

Develop your trading skills, build your trading account, and slowly increase your size.

What is averaging down?

        You buy 1,000 shares for $10. You plan to sell it at $12 but the price go down to $8. You lose money. But, if instead of accepting the loss and moving on, you buy another 1,000 shares at $8, you now have 2,000 shares with an average cost of $9. It is unlikely the price will hit your $12 target, but it is likely that the price will rally back to $9. At $9, you can sell all of your 2,000 shares at break-even and extricate yourself from this losing trade with no loss. Even better, if the price goes to $9.50, you can close your 2,000 shares with a $1,000 profit. It sounds very tempting, but it is wishful thinking.

For a beginner, averaging down a losing trade is a recipe for wiping out one's account.

    Let me share you the story of a Canadian trader Brain Hunter whose gamble on the natural gas Futures market went bad. Brain Hunter was a superstar trader with an impressive track record at Amaranth Advisors, a massive hedge fund with over $9 billion in assets in 2006. This 32 year old trader from Calgary, Alberta, Canada was up $2 billion from trading in natural gas earlier in 2006. That summer though, natural gas dropped to below $4 in a terrible, unusually steep down move. With a deep billion-dollar pocket, Mr. Hunter ignored the market and repeatedly averaged down on a risky, volatile bullish position on natural gas. JPMorgan, his broker, kept calling for more collateral to support his enormous positions, and when the collateral didn't arrive, he was forced to liquidate his positions. Amaranth Advisors went from $10 billion in managed assets to $4.5 billion, accepting a $6.6 billion loss which led to the company being dissolved entirely.

Just a few weeks after that, natural gas prices rebounded and actually went higher. "If only Brain Hunter had a bigger account." Apparently an account with $10 billion in it was not big enough.

    If you've made a bad decision, take a loss and get out early. Your job is not prediction and anticipation, but the identification of trends and then the taking of a successful ride on them.

Strategy 1 : ABCD Pattern

The ABCD Pattern is one of the most basic and easiest patterns to trade, and it is an excellent choice for beginner and intermediate traders. Although it is simple and has been known for a long time, it still works effectively because so many traders are trading it. You should do whatever all of the other traders are doing because a trend is your friend. A trend may very well be your only friend in the market.

     ABCD Patterns start with a strong upward move. Buyers are aggressively buying a stock from point A and making constantly new highs of the day (point B). You want to enter the trade, but you should not chase the trade, because at point B it is very extended and already at a high price. In addition, you cannot say where your stop loss should be. You must never enter a trade without knowing where your stop is.

    At point B, traders who bought the stock earlier start slowly selling it for profit and the price comes down. You should still not enter the trade because you do not know where the bottom of this pull back will be. However, if you see that the price does not come down from a certain level, such as point C, it means that the stock has found a potential support. Therefore, you can plan your trade and set up stops and a profit taking point.

Summarize ABCD Pattern Strategy

1. When I observe with my scanner or I'm advised by someone in our chatroom that a stock is surging up from point A and reaching a significant new high for the day (point B), I wait to see if the price makes a support higher than point A. I call this point C. I do not jump into the trade right away.
2. I watch the stock during its consolidation period. I choose my share size and stop and exit strategy.
3. When I see that the price is holding support at level C, I enter the trade close to the price of point C in anticipation of moving forward to point D or higher.
4. My stop is the loss of point C. If the price lower than point C, I sell and accept the loss. Therefore, it is important to buy the stock close to point C to minimize the loss. Some traders wait and buy only at point D to ensure that the ABCD pattern is really working. In my opinion, that approach basically reduces your reward while at the same time increasing your risk.
5. If the price moves higher, I sell half of my position at point D, and bring my stop higher to my entry point (break-even).
6. I sell the remaining position as soon as my target hits or I sense that the price is losing steam or that the sellers are acquiring control of the price action. When the price makes a new low on my 5- minute chart, it is a good indicator that the buyers are almost exhausted.

Strategy 2: Bull Flag Momentum

    In day trading, Bull Flag is a momentum Strategy that usually works very effectively on low float stocks under $10. This trading strategy is difficult to manage the risk in and requires a fast execution platform.

Example of Bull Flag formation with one consolidation period.

        This pattern, shown above is named Bull Flag because it resembles a flag on a pole. In Bull Flag, you have several large candles going up (like a pole), and you also have a series of small candles moving sideways (like a flag), or, as we day traders say, "consolidating". Consolidation means that the traders who bought stocks at a lower price are now selling and taking their profits. Although that is happening, the price does not decrease sharply because the buyers are still entering into trades and the sellers are not yet in control of the price. Many traders who missed buying the stock before the Bull Flag started, will now be looking for an opportunity to take a trade. Wise traders know that it is risky to buy a stock when the price is increasing significantly. That's called "chasing the stock". Professional traders aim to enter the trade during quiet times and take their profits during the volatile times. That is the total opposite of how amateurs trade. They jump in or out when stocks begin to run, but grow bored and lose interest when the prices are, shall I say, sleepy.

        Chasing the stocks is an account killer for beginners. You must wait until the stock finds its high point, and then you must wait for the consolidation. As soon as the price starts breaking up the consolidation area, you can begin purchasing stocks. As I've mentioned elsewhere, patience truly is virtue.

        Usually a Bull Flag will show several consolidation periods. I enter in only during the first and second consolidation periods. Third and higher consolidation periods are risky because the price has probably been very extended in a way that indicates that the buyers will soon be losing their control.

Example of Bull Flag formation with two consolidation periods on RIGL

        

        This is an example of two Bull Flag Patterns. It is normally hard to catch the first Bull Flag, and you will probably miss it, but your scanner should alert you to it so that you can be ready for the next Bull Flag.

Example of my intraday Bull Flag Strategy Scanner

      

        As you can see, my scanner showed RIGL at both 12:31:52 p.m and 12:36:15p.m. As soon as I saw that, I realized that there was also a very high relative volume of trading (120 times the normal trading volume), which made this a perfect setup for day trading. I waited for the first consolidation period to finish and, as soon as the stock started to move toward its high for the day, I jumped into the trade. My stop loss was the breakdown of the consolidation period. I marked my exit and entry on Figure 1.7 below.

 Figure 1.7 - Entry, stop and exit of a Bull Flag Strategy on RIGL

        You can see the Bull Flag Pattern on any short time frame: 1-minute, 2-minute and 5-minute charts. Now let's take a look at Figure 1.8, a 2-minute chart for OPTT on June 1, 2016. As you can see, the stock had a powerful Bull Flag right at the Open, followed by a consolidation period. As soon as the first consolidation period was completed, another small Bull Flag formed. The volume of shares traded is significantly higher after consolidation, which is a confirmation for a long entry.

        You can also see another Bull Flag in the OPTT 2 minute chart followed by another consolidation period. As shown below in Fig 1.8, after the second consolidation period, the volume of shares traded was significantly higher, a confirmation for another long entry. I don't trade more than two Bull Flags in a stock and, as you can see in this chart, the stock started to sell off after the third Bull Flag (at around $7). Aside from the strategy, did you notice that OPTT moved from $1.50 to almost $7 in just 35 minutes? This kind of move can be expected from low float under $10 stocks.

Fingure 1.8 - Screenshoot showing three consolidation periods in OPTT. Note the volume increases after each consolidation period.

Summarize Aziz Andrew trading strategy:

1. When I see a stock surging up (either on my scanner or when advised by someone in our chatroom), I patiently wait until the consolidation period. I do not jump into the trade right away (you will recall that is the dangerous act of "chasing the stock").
2. I watch the stock during the consolidation period. I choose my share size and stop and exit strategy.
3. As soon as prices are moving over the high of the consolidation candlesticks, I enter the trade. My stop loss is the break below the consolidation periods.
4. I sell half of my position and take a profit on the way up. I bring my stop loss from the low of the consolidation to my entry price (break-even)
5. I sell my remaining positions as soon as my target hits or I sense that the price is losing steam and the sellers are gaining control of the price action.

The Bull Flag is essentially an ABCD Pattern that will happen more often on low float stocks. Waiting for the stock to break the top of a consolidation area is a way of reducing your risk and exposure time in low float stocks. Instead of buying and holding and waiting, which increases exposure time, scalpers just wait for the breakout and then send their order. Get in, scalp, and get out quickly. That's the philosophy of momentum scalpers:

• Get in at the breakout
• Take your profit
• Get out of the way

The Bull Flag Pattern is found within an uptread in a stock. The Bull Flag is a long-based strategy. You should not short a Bull Flag. It is a risky strategy and beginners should be very careful trading these. If you choose to, trade only in a small size and only after sufficient practice in simulators You will also need a super-fast execution system for scalping.

Strategies 3 and 4: Reversal Trading

        Top and bottom Reversals are two other trading strategies that day traders love using because they have very defined entry and exit points.

How to use indecision or Doji candlesticks to take an entry, how to understand where to set your stops and your profit targets, and how to trail your winners.

What goes up, must come down. Don't chase the trade if it is too extended. The inverse is also true. What goes down will definitely come back up to some extent. When a stock starts to sell off significantly, there are two reasons behind it:

1. Institutional traders and hedge funds have started selling their large position to the public market and the stock price is tanking.
2. Traders have started short selling a stock because of some bad fundamental news, but they will have to cover their shorts sooner or later. That is where you wait for an entry. When short sellers are trying to cover their shorts, the stock will reverse quickly. That is called a "short squeeze". You want to ride that.

What goes up, must come down.

Example of a Reversal Strategy on EBS.

        Each Reversal Strategy has four important elements:

1. At least five candlesticks on a 5-minute chart moving upward or downward.
2. The stock will have an extreme 5-minute RSI indicator (Relative Strength Index). An RSI above 90 or below 10 will pique my interest. The RSI, developed initially by famous technical analyst Welles Wilder, Jr., is an indicator that compares the magnitude of recent gains and losses in price over a period of time to measure the speed and change of price movement. The RSI values range from 0 to 100. Traders in Reversal Strategies use RSI values to identify overbought or oversold conditions and to find buy or sell signals. For example, RSI readings above 90 indicate overbought conditions and RSI readings below 10 indicate oversold conditions. Your trading platform or scanner software calculates the RSI automatically for you. If you are interested, an online search will bring up quite a bit more information about the RSI. (These two elements demonstrate that a stock is really stretched out, and you must pay close attention to your scanner for all of these data points. RSI < 20 & RSI > 80.)
3. The stock is being traded at or near an important intraday support or resistance level. I only take reversal trades when the price is near a significant support level (for Bottom Reversal) or a significant resistance level (for Top Reversal).
4. When the trend is coming to an end usually indecision candles, such as a spinning top or Doji, form. That is when you need to be ready.

In reversal trading, you are looking for either Doji or indecision candlesticks.

Shooting star (Berish Doji) ->

a good indication that the sellers may soon control of the price and will push that price down.

Hammer (Bullish Doji) ->

a good indication that the buyers may now gain control of the price and push that price up.

"catching a falling knife"

confirmation of reversal:

1. the formation of a Doji or indecision candle
2. the first 1-minute or the first 5-minute candle to reach a new high an important intraday support level. *Support Level

RSI extremes (RSI > 90, RSI < 10)

Reversal Strategies -> main tasks -> watch -> running up/down

*support and resistance levels

Aziz Andrew -> Top Reversal Strategy:

1. Set up a scanner to highlight stocks with four or more consecutive candlesticks moving upward. When I see the stock hit my scanner, I quickly review the volume and daily level of support or resistance near the stock to see if it will be a good trade or not.
2. I wait for confirmation of a Top Reversal Strategy: (1) formation of a bearish Doji or indecision candle or, instead, a very bearish candlestick, (2) the stock is being traded at or near a significant resistance level at high volume, and (3) the RSI must be higher than 90.
3. When I see the stock make a new 5 minute low, I consider this as a sign of weakness. I start short selling the stock if I have shares available to short.
4. My stop will be the high of the previous candlestick or simply the high of the day.
5. My profit target is either (1) the next level of support, or (2) VWAP or 9 EMA or 20 EMA moving averages (whichever is closer), or (3) when the stock makes a new 5-minute high, which means the buyers are once again gaining control and the sellers are exhausted.

Strategy 5: Moving Average Trend Trading

- Many stocks will start an upside or downside trend around 11a.m (NY time) -> 1-minute and 5 minute charts. (moving average for going long or below the moving average for short selling).

Moving average trend -> usually best work during Mid-day and the Close. At the Open (in the morning session), when volatility is high, it's hard to identify a Moving Average Trend play.

Having said that, a Moving Average Trend Strategy is an excellent trading strategy, because it usually does not require a very fast decision making process and trade execution. You can enter the trades manually and still be successful.

Strategy 6: VWAP Trading (Volume Weighted Average Price)

- VWAP is the most important technical indicator for day traders. VWAP is a moving average that takes into account the volumes of the shares being traded at any price.

- VWAP is an indicator of who is in control of the price action - the buyers or the sellers. When stock is traded above the VWAP, it means that the buyers are in overall control of the price and there is a buying demand on the stock. When a stock price breaks below the VWAP, it is safe to assume that the sellers are gaining control over the price action.

- VWAP is often used to measure the trading efficiency of institutional traders. Professional traders working for investment banks or hedge funds need to trade large amounts of shares each day. They cannot enter or exit the market by just one single order though because the market is not LIQUID enough to enter a one-million share buy order in. Therefore, they need to LIQUIDATED their orders slowly during the day.

- Traders who buy significantly higher than VWAP may be penalized because they cost the institution money for taking that large position.

 - A buy order executed below the VWAP would be considered a good fill for them because the stock was bought at a below average price. 

- A sell order executed above the VWAP would be deemed a good fill because it was sold at an above average price.

- After the market opens, the stock in Play will trade heavily in the first five minutes. If the Stock in Play has gapped up, some individual shareholders, hedge funds or investment banks may want to as soon as possible sell their shares for a profit, before the price drops. At the same time, some investors wanting to take positions in the stock will want to buy as soon as possible, before the price goes even higher. Therefore, in the first five minutes, an unknown heavy trading is happening between the overnight shareholders and the new investors. 

- Scalpers usually ride the momentum right at the Open.

- After volatility decreases around ten to fifteen minutes into the Open, the stock will move toward or away from the VWAP.

- This is a test to see if there is a large investment bank waiting to buy or sell. If there is a large institutional trader aiming to buy a significant position, the stock will pop over the VWAP and move even higher. This is a good opportunity for us day traders to go long.

- If there are large shareholders wanting to get rid of their shares, then this is a good point for them to liquidate their positions. This is an excellent short selling opportunity for day traders.

- If there is no interest in the stock from market makers or institutions, the price may trade sideways near VWAP.

Summary Aziz trading strategy for VWAP

1. monitor the price action around VWAP at the Open. If a stock shows respect toward VWAP break (for short selling) or VWAP support (for going long).
2. Aziz usually buy as close as possible to VWAP to minimize his risk. Aziz stop will be a break and a close 5-minute close below VWAP. For short selling, He short near VWAP with a stop of a close above the VWAP.
3. Aziz keep the trade until he hit his profit target or until he reach a new support or resistance level.
4. He usually sell half-positions near the profit target or support or resistance level and move his stop up to my entry point or break-even.

Strategy 7: Support or Resistance Trading

- Horizontal support or resistance is Andrew favorite style of trading.

- Support is a price level where buying is strong enough to interrupt or reverse a downtrend. When a downtrend hits a support level, it bounces. Support is represented on a chart by a horizontal line connecting two or more bottoms. 

- Resistance is a price level where selling is strong enough to interrupt or reverse an uptrend. Resistance is represented on a chart by a horizontal line connecting two or more tops.

- Minor support or resistance causes trends  to pause, while major support or resistance causes them to reverse. Traders buy at Support and sell at Resistance.

- Look for significant news events (extreme earnings report or a new drug approval.)

- Daily charts and find price levels that have been shown in the past to be critical.

- Finding price support or resistance levels is tricky and requires trading experience.

- Support or resistance lines on daily charts are not always easy to find, and at times you will not be able to draw anything clear.

- If you can't see S/R lines clearly, other traders will also not see those lines clearly. Don't force yourself to draw S/R lines. Andrew plan his trades based on the VWAP or Moving Averages or other chart patterns that I earlier discussed.

 

Some hints for drawing support or resistance lines on daily charts:

1. You will usually see indecision candles in the area of support or resistance because that is where buyers and sellers are closely fighting each other.
2. Half-dollars and whole dollars usually act as a support or resistance level, especially in lower than $10 stocks. If you don't find a support or resistance line around these numbers on daily charts, remember that in day trading these numbers can act as an invisible support or resistance line.
3. You should always look at the recent data to draw lines.
4. The more of a line that is touching extreme price lines, the more that is touching extreme price lines, the more that the line is a better support or resistance and has more value. Give that line more emphasis.
5. Only the support or resistance lines in the current price range are important. If the price of the stock is currently $20, there is no point in finding support or resistance lines in the region when it was $40. It is unlikely that the stock will move and reach that area. Find only the support or resistance area that is close to your day trading range.
6. Support or resistance lines are actually an "area" and not exact numbers. For example, when you find an area around $19.69 as a support line, you must expect price action movement around that number but not at exactly $19.69. Depending on the price of the stock, an area of 5 to 10 cents is safe to assume. In the example with a support line of $19.69, the real support area might perhaps range from $19.62 to $19.72.
7. The price must have a clear bounce from that level. If you are not certain if the price has bounced in that level, then it is probably not a support or resistance level. Important support or resistance levels on daily charts stand out. They shout at you: "grab me by the face".
8. For day trading, it is better to draw support or resistance lines across the extreme prices or wicks on daily levels rather than across areas where the bulk of the bars stopped. This is the complete opposite of swing trading. For swing trading, you need to draw support or resistance lines across the edges of congested areas where the bulk of the bars stopped rather than across the extreme prices. This is because the close price is more important for swing trading than the extreme wicks in daily bars are. The close price of a stock on a daily chart is the price that the market makers and professional traders have agreed on. Previous extreme high and low wicks have been made by day traders, so you should look at those.

 Summarize Andrew trading strategy for support or resistance trading:

1. Each morning, after I make my watch list for the day, I quickly look at the daily charts for that watchlist and find the areas of support or resistance.
2. I monitor the price action around those areas on a 5-minute chart. If an indecision candle forms around one of those areas, that is the confirmation of that level and I enter the trade. I usually buy as close as possible to the support level to minimize my risk. Stop will be a break and a close of a 5-minute candlestick under the support level.
3. I will take profit near the next support or resistance level.
4. I keep the trade open until I hit my profit target or I reach a new support or resistance level.
5. I usually sell half-positions near the profit target or support or resistance level and move my stop up to my entry point for break-even.
6. If there are no next obvious support or resistance levels, I will consider closing my trade at or near half-dollar or round-dollar levels.

Strategy 8: Red-to-Green Trading

 

- The previous day close is a powerful level of support or resistance and traders should trade toward it when there is rising volume.

- if the current price of a stock is higher than the previous day close (for Stocks in Play that gapped up), the market is moving from a Green day to a Red day (meaning that the percentage that the price has changed will now be negative, which will be shown as red in most of the Exchanges and platforms). This is a Green-to-Red move. 

- If the price lower than the previous day close (for stocks that gapped down), the market is moving from a Red day to a Green day (meaning that the percentage that the price has changed will now be positive, which will be shown as green in most of the Exchanges and platforms). This is a Red-to-Green move. 

 

 Summarize Andrew trading strategy for Red-to-Green trading:

1.  When I make my watchlist for the day, I monitor the price action around the previous day close.
2. If a stock moves toward the previous day close with high volume, I consider going long with the profit target of the previous day close.
3. My stop loss is the nearest technical level. If i buy near VWAP, my stop loss will be the break of VWAP. If I buy near a moving average or an important support level, my stop loss will be the break of moving average or support level.
4. I usually sell all at the profit target. If the price moves in my favor, I bring my stop loss to the break-even and do not let the price turn against me. Red-to-Green moves should work immediately.
   

Strategy 9 : Opening Range Breakouts (ORB)

 

 

This strategy signals an entry point, but does not determine the profit target. You should define the best profit target based on the other technical levels. The ORB is an entry signal only, a full trading strategy must define the proper entry, exit and stop loss. If a stock has gapped up, some overnight traders start selling their position for a profit. At the same time, some new investors might jump in to buy the stock before the price goes higher. If a stock gaps down, some investors might panic and dump their shares right at the Open, before it drops any lower. On the other side, some institutions might think this drop could be a good buying opportunity and they will start buying large positions at a discounted price.

Therefore, there is a complicated mass psychology unfolding at the Open for the Stocks in Play. Wise traders sit on their hands and watch for the opening ranges to develop and allow other traders to fight against each other until one side wins.

Typically, you want to give the opening range at least five minutes. This is called the 5-minute ORB. Some traders will wait even longer, such as for thirty minutes or even for one hour, to identify the balance of power between the buyers and sellers. They then develop a trade plan in the direction of the 30 minute or 60 minute breakout. As with most setups, the ORB strategy tends to work best with mid to large cap stocks.

not recommended for low float.

Opening range to be smaller than the daily ATR. If a stock moves near or higher than its ATR at the Open, it is not a good candidate for the ORB Strategy. It means that the stock is too volatile and without a catchable move. 

Stocks in Play move, and those moves are directional and catchable. If a stock constantly moves up and down $2 with high volume, but without any directional signal, you want to stay away from it. Those stocks are usually being heavily traded by computers.

Summarize ORB Strategy:

1. After Andrew build his watchlist in the morning, he closely monitor the shortlisted stocks in the first five minutes. I identify their opening range and their price action. How many shares are being traded? Is the stock jumping up and down or does it have a directional upward or downward movement? Is it high volume with large orders only, or are there many orders going through? I prefer stocks that have high volume, but also with numerous different orders being traded. A stock that has traded 1 million shares, but those shares were only ten orders of 100,000 shares each, is not a liquid stock to trade. Volume alone does not show the liquidity; the number of orders being sent to the Exchange is as imortant.
2. The opening range must be significantly smaller than the stock's Average True Range(ATR). I have ATR as a column in my Trade Ideas scanner.
3. After the close of the first five minutes of trading, the stock may continue to be traded in that opening range in the next five minutes. But, if I see the stock is breaking the opening range, I enter the trade according to the direction of the breakout: long for an upward breakout and short for a downward move.
4. My stop loss is a close below VWAP for long positions and a close above VWAP for short positions.
5. My profit target is the next important technical level, such as:(1) important intraday daily levels that I identify in the pre-market,(2) moving averages on a daily chart, and/or(3) previous day close.
6. If there was no obvious technical level for the exit and profit target, I exit when a stock shows signs of weakness(if I am long) or strength(if I am short). For example, if the price makes a new 5-minute low, that means weakness and I consider selling my position if I am long. If I am short and the stock makes a new 5-minute high, then it could be a sign of strength and I consider covering my short position.

Strategy above -> 5min ORB/ 15-minute or 30-minute ORBs.

Other Trading Strategies

 RSI

the Moving Average Convergence Divergence (MACD) or the moving average crossover.

Day trading is not mechanical and automated, it is discretionary, and traders need to make real time decisions. The success of each strategy is based on judgment and the proper execution of it by the trader.

 Stick with one trading strategy.

You don't want to live trade a new strategy until you've proven that it's worth investing in. You may practice three months in a simulator, and then trade small size with real money for one month, and then go back to the simulator to work on your mistakes or practice new strategies for another three months. There is no shame in going back to simulator at any stage of your day trading career.

Trading Based on the Time of Day

The Open, Late-Morning, Mid-day, and the Close. Each time period should be treated differently, and you have to be careful because not all strategies are effective in every time period.

 

The Open tends to last about 30 to 60 minutes (from 9:30 a.m up to 10:30 a.m. New York time).

- Bull Flag Momentum and VWAP trades tend to be the best strategies for the Open.

 

Late-Morning (10:30 a.m. to 12 p.m.) the market is slower but there is still good volatility in the Stocks in Play. This is one of the easiest times of the day for new traders.

- VWAP Reversal and VWAP False Breakout ( the two strategies that tend to be the best strategies for the Late-Morning). Rarely trade Bull Flag in the Late-Morning, Mid-day or at the Close.

 

Mid-day (12 p.m. to 3 p.m.) the market is slower. This is the most dangerous time of the day. There is less volume and liquidity. New traders tend to overtrade at Mid-day. At times, good trading, and smart trading, is to not be trading at all. It is best to gather information during the Mid-day in preparation for the Close. Watch the stocks, prepare for the Close, and be very, very careful with any trading you do.

- Reversal, VWAP, Moving Average, and Support or Resistance trades tend to be the best strategies for the Mid-day.

 

Close (3 to 4 p.m.), stocks are more directional, so I stick with those that are trending up or down in the last hour of the trading day. The daily closing prices tend to reflect the opinion of Wall Street traders on the value of stocks. Many of the market professionals take profits at that time to avoid carrying trades overnight. If the stock is moving higher in the last hour, it means the professionals are probably bullish on that stock. If the stock is moving lower in the last hour, the market professionals are probably bearish.

- VWAP, Support or Resistance, and Moving Average trades tend to be the best strategies for the Close.

 

Many traders lose during the day what they have profited in the Open. Don't be one of them. I created a rule for myself. I am not allowed to lose more than 30% of what I have made in the Open during the Late-Morning, Mid-day and the Close.