Learn Important Day Trading Techniques The Right Way

One of my favorite day trading techniques is to utilize swing trading or short term trading strategies and reduce the time frame to intra-day once I’m comfortable trading the strategy using longer time frame.

Once I reduce the time frame I then determine if the strategy has promising qualities with the limited intra-day time frame.

The 2X Inside Day Strategy Revisited

Last week I presented a great swing trading strategy that takes advantage of low volatility periods where markets are consolidating and preparing for the next big move.

I purposely demonstrated this strategy to you using daily time frame because I wanted you to become familiar with the rules of the strategy and give you a bit of time to get familiar with how the strategy works.

If you want to review the 2X Inside Day Strategy using daily charts prior to learning how to apply the method to intra-day charts you can do that by going to this link. 

As you begin trading more and more you will notice that different strategies have different characteristics and the better you understand these characteristics the better you will become in choosing the best set ups for each strategy.

The Set Up

Since we are day trading the 2X Inside Day Strategy we have to make some minor adjustments.

If you recall I looked for the market to make a 50 day price high or low in the original strategy.

I find that with daily charts the 2X strategy works well using reversals but with day trading it tends to work best with short term reversals.

So what I do is find a set up that occurs after the market made a 10 day low against the current trend.

This way I catch the market after a short pause and immediately before the market resumes the strong trend.

You can see in this particular example how the stock is trending strongly before it makes a 10 day low and the pattern sets up immediately thereafter.

You want to see a wide bar and two inside days following that bar.

day trading techniques

10 Day Low Against The Major Trend Works Great

Once you isolate the set up you can place your entry order for next day’s opening bell.

The best way to trade the 2X Inside Day is to place a buy stop $0.05 above the high price that was achieved on the third day and once your filled you need to place a sell stop about $0.15 cents below the third day low price.

These examples are to the long side but the strategy works just as well to the downside. Just make sure you don’t confuse sell stops with buy stops, this will cause you losses on top of missing out on the trade.

day trading techniques

Place Your Protective Stop Only After You Get Your Entry Fill

The exit point would be a MOC (market on close) order that you would place after your fill.

Many traders try to predict intra-day market peaks and I’m one of them.

However, after testing dozens of different exit strategies I found this method to work best with liquidating near the closing.

The momentum is coming back into the market after two very quiet days, so typically the momentum follows through till the opening bell, especially if there is extended buying coming into the market.

You can see the entire pattern from beginning to end on a daily chart in this example.

day trading techniques

The Stock Closes Near The High Of The Day Once It Breaks Out

Before I move on to another example I want you to see the entire progression using 15 minute charts. The 15 minute time frame is what I use for stocks and ETF day trading techniques.

When I trade futures or currencies I switch to 5 minute charts. The 15 minute time frame reduces the amount of random noise that is present in intra-day stock chart analysis and it helps me see more focused price action.

day trading techniques

The 15 Minute Time Frame Is Good For Stocks And ETF’s

Second Example Using The 2X Inside Day Strategy

I want you to get a good feel for this method so here is another great example of the good set up.

Notice that that my risk level is lower than $1.00 which is the ultimate goal when day trading or short term trading any stock.

You want to find low risk set ups such as this one so that your risk to reward is exceptionally high.

This is very important and is absolutely necessary especially when you are day trading.

day trading techniques

These Are The Type Of Set Ups You Want To See

You can see how the stock rallied and closed near the high of the day.

The profit target should always be MOC for this type of strategy, especially when you are trading stocks.

MOC doesn’t mean you will be executed at the closing bell, it simply means your exit will be filled at the closing price range which is usually within a few cents of the closing price.

day trading techniques

The 2X Pattern Looks Like Mini Triangle Or A Sideways Cone On The Bar Chart

You can see one last example on this 15 minute bar chart. I first isolate the pattern on a daily chart and once I’m ready to trade I switch to a 15 minute bar chart and place both charts next to each other.

This way I can see how the pattern progresses on both charts simultaneously.

For day trading purposes I don’t bother with the weekly chart but if the trade involves holding positions overnight I will start the analysis with a weekly chart and work down from there.

day trading techniques

Stock Takes Off After two Day Pause

Things To Keep In Mind

The 2X Inside Day Strategy works great with stocks, futures and forex markets using intra-day time frame.

Don’t forget to modify your settings because the set up uses 10 day’s against the trend prior to the cone shape triangle develops while the regular swing trading pattern relies on 50 day high and low prices.

If you’re not clear on the difference you can visit Market Geeks and watch the previous week’s video to review the original pattern.

Keep in mind that I use 15 minute bar charts for stocks and ETF’s and 5 minute bar charts for e-mini futures, commodities and Forex contracts.

For more on this topic, please go to: Is Day Trading Or Swing Trading More Profitable and Learn To Day Trade Like A Pro

Wishing you the best,

By Roger Scott
Senior Trainer
Market Geeks