Why are support and resistance levels crucial when participating in the Forex day trading market?

Simply put, they represent key, strategic price points at which traders processed orders involving millions or even billions of dollars. No wonder price at times has a hard time getting past a previous high or low. Those levels are being fiercely defended by traders who have large amounts of money at stake and who do not want to see price break those levels.

For this reason anyone who engages in Forex day trading should learn how to trade support and resistance. The following checklist provides crucial guidelines:

1. Support and resistance levels are much more significant on the higher time frames. Pay particular attention to price highs and lows on the daily chart as this time frame is commonly used by big traders.

2. A price high or low has more significance when it has a number of candles either side of it which are lower (in the case of a price high) or higher (in the case of a price low).

3. Before you consider Forex day trading at a support or resistance level, see if there are more factors that would indicate this is a key price level.

For example, does a trendline intersect at the same point? Does the support or resistance line match up with a Fibonacci level, either a retracement or an extension? Does the support or resistance level coincide with a pivot point if you are in the practice (and it’s a wise one) of calculating pivot levels when Forex day trading?

4. Has a key support resistance level been broken? Then look to see if price will come back to test that level. Remember, resistance once broken can become support in the future and support once broken can become resistance in the future.

These Forex day trading scenarios can present excellent trading opportunities as you put an entry order in at the key level and wait for price to come back and pull you in. Within a short time your dealing spread is covered and you are in profit.

5. The market spends most of its time in trading ranges or consolidation channels. You need to accept that this is a characteristic of Forex day trading and adjust your mindset accordingly. Identify the high and low of the trading channel and manage your trades accordingly.

6. After identifying a trading channel or range and you see a trading opportunity, set your entry level at the base of the channel if you are going long or at the top of the channel if you are going short.

Don’t chase after price once it breaks out of the channel (although many who engage in Forex day trading do so). You will not get the optimal entry point. Waiting for price to take you in either at the top or bottom of the channel means you can have a smaller stop and your price target is closer.

7. Pay particular attention to the previous day’s high and low. Price will often hesitate and retrace at these levels. If you are a Forex day trading scalper, you can often grab a nice pull back of 10 pips or more at these strategic levels.

Note: Although there are various ways to calculate the previous 24 hour period depending on where you live, using GMT as a standard is often beneficial. Midnight GMT is a time when the market is generally very quiet and unlikely to make new highs or lows.

Succeed Or Fail?

It is unlikely you will succeed at Forex day trading if you fail to understand or take into consideration support and resistance. This indicator is that crucial! Yes there may be fancy indicators out there with all the bells and whistles, but this simple indicator, marking where price reached a high or low during previous trading sessions, can be one of the most powerful and effective Forex day trading tools available.

Be sure you spend sufficient time studying it, examining your charts, marking off the key levels each time you begin a new Forex day trading session.

Article written by Michael A. Jones

Having been a forex trader for 25 years it amuses me when I see writers defend day trading. They say it really can make money! – Of course they have no track record to back it up just empty words. Fact is you are guaranteed to lose in day trading for one simple reason:

All Movements in Short Time Frames Are Random

Trillions of dollars trade hands each day and million of trader’s trade, all with different objectives and opinions and to say that you can predict what they do in a few hours or a day, is ridiculous. You can’t.

Volatility takes prices anywhere in a day and support and resistance levels are meaningless, so you would have the same success rate flipping a coin.

It’s absolutely impossible to get the odds on your side – PERIOD

This is of course why you NEVER see any of the vendors selling these systems give you a real time track record – Why?

Because they don’t dare trade it!

They would rather write some enticing copy and appeal to the greed and naivety of traders and make their money selling you the system – they win you lose – period.

But I have seen a track record you may say and yes will have, but it’s NOT real.

If you check the disclaimer on it you will see there all hypothetical!

What does that mean?

It means done in hindsight knowing the closing prices!

Now who can’t do that it’s not exactly hard.

If we all knew tomorrows price today we would all be millionaires but we don’t – and neither do we know what will happen tomorrow, so there not worth the paper their written on.

Day trading is a good story but the logic doesn’t add up and the biggest lie about day trading is you can make money at it longer term.

If you could you would see a track record or the vendor would shut up and trade it himself and not need your few hundred dollars.

If you want to win

Appreciate that trading is an odds game and to trade the odds you need to trade over longer periods ,where the data is valid and you can have a chance of getting the odds on your side.

Finally

Don’t day trade, get real and trade with the odds on your side.

One of the hottest and exhilirating methods to make extra money these days is day trading. There are people that get involved in day trading to supplement their regular paycheck, and others treat it as a full time profession. Several people making outstanding livings with day trading which explains why several people are tempted to try it out.

Obviously, day trading isn’t a path to fast and easy riches. You’ll want to understand how to go about it the right way. Day trading has some risks, but knowing how to deal with those risks and make educated choices will provide you with the strongest chance at boosting your earnings, and minimizing any losses.

The way to earn money in day trading is to purchase low, and sell high. Obviously, the question is – how do a trader know when to buy stock and sell?

Here you will find some essential advice for you to earn cash with day trading.

Read the market news and stay informed about the stock market. You’ll need to stay on top of developments in the markets, like mergers, takeovers, and earnings announcements for leading businesses. It’s important to have a strong overview of the news in the markets.

Don’t spend time on stocks with minimal volatility. Change is the name of the game for day trading. When day trading you are buying and selling shares each day so you need to be involved with stocks with daily price changes in price every day.

Better your mathematical analysis skills. Being able to make sense of financial information and numbers is critical to being a successful day trader. Now don’t worry – you don’t need to be a mathematical wiz – but there are a few primary computations that you will need to have a good understanding of.

Learn how to have nerves of steel. You need to keep your emotions steady to not allow them to alter your assessments. Whether someone is overly excited about a giant profit, or profoundly down-and-out about a loss, both of these reactions can block your capability to stay in the game, make smart decisions, and think clearly.

You may not become wealthy right away, but using these hints will put you on your way to making great cash with day trading. There’s losts of cash to be earned with day trading and with a little work, you will be profiting from this exciting online job.

If you’re attracted to the idea of becoming a day trader, you will quickly find that your eyeballs are coveted by dozens, if not hundred, of day trading education programs. Large number of these programs come with so many bells and whistles they practically drive themselves over to your house and fold your laundry. However, when all you want to do is understand how day trading works and how to make money, the pile of systems and tools can be frustrating. Luckily, an up front day trading education is not hard to find.

1. Begin with Basics

Start with the fundamentals for strong base. There are many courses which give assurance of complete proficiency in day trading. Look for less flashy materials that emphasize understanding the core mechanics of exercising a trade, managing your cash flow, and profiting even after commissions are deducted.

It will take some time to learn the relevant trading terms of each trading market of your interest. There are a number of quizzes and other programs to ensure that you understand all of the lingo and the different trading functions you can execute. Skip these basics, and you could suffer some embarrassing losses later.

2. Add as You Learn

Once you finished with your fundamentals, you will ready to start adding layers. This will manage your educational program, without overflowing you with data.

Once you become expert in one topic, you should test yourself before moving to next. Don’t hesitate to build your own resource library, either. Reading it once and remembering it later isn’t always easy, and when the pressure’s on you will appreciate having your own reference material and notes handy.

3. Suit Yourself

As you work through various day trading education programs by using different strategies, you will find that some of strategies work better for you than others. Some traders are better at rapid-fire systems and like executing multiple trades a minute. Others prefer a more moderate pace, foreign stocks, bonds, and so on. Find the niche and the trading style that best matches your personality and get comfortable with the fit between your style and the system.

According to many day traders, finding your style is the most essential part of day trading education. They insist that a system only works as well as the person running the system, and that you will trade more comfortably and profitably in a system built to accommodate your personal style. Try several to determine which is the most appropriate for you over time.

4. Continuously Study the Craft

Finally, you will want to ensure that you build time into your trading schedule to continually study the craft. You will always learn something new in this changing world of day trading market. Shutting yourself off from new strategies and techniques limits your profitability over the long term, and can make you unprofitably arrogant. Always try to learn new things to increase your trading skills!

Day Trade Forex

Most people who are interested in Forex trading are regular those providing no prior training or suffer in short-term trading, the present unfortunately are being purchased a bill of goods. Day Trade Forex

Late night infomercials irresponsibly tote Forex trading itself as the Holy Grail, and verify clips of past client recommendations from a few lucky people who drew up particularlly atypical trades. “I made $800 right now morning before probable to work,” “I cleared $3,000 my first week, part-time,” so kind of junk. These infomercials employ a two-step process to jam an expensive product of questionable worth down your throat. Day Trade Forex

Usually it’s a piece of software that has arrows which light up red or green, and when all four of them light up green you enter your position. Simple, huh? The software costs about $3,000. But they don’t tell you that up front – the television bit just invites you to a free seminar full of happy, excited people. At the seminar they fill your head full of dreams and make the price tag seem like a fraction of your first month’s profits. You feel like you are really missing out if you don’t join the crowd and get in line to buy. Day Trade Forex

While there is some merit to the four arrows all lighting green, which indicates that the price trend is all in one direction over several different time-frames, blindly following it is a horrible system. You cannot rightly call yourself a trader if this is your approach. You are just a monkey pushing buttons. Day Trade Forex

Don’t plan on making any long-run profits as a monkey – maybe a banana here and there, but you WILL slip on the peels. Think about it – if this software could really make money like they claim (virtually on autopilot), no way do they sell it. They would get much richer simply using it themselves trading large positions. I’m not saying that daytrading Forex cannot be beaten. Much to the contrary, I trade the EUR/USD successfully intraday. Day Trade Forex

You probably can too. But avoid purchasing an expensive system. In fact, I recommend avoiding mechanical systems altogether. All you need is some basic trader training in the way of technical analysis, some idea of a solid approach, and a little experience watching the markets to get a feel for them. Stop what you are doing RIGHT NOW and get your Life Changing Day Trade Forex Program. It’ll change your Life Forever!

Be honest, now. Back in ‘99 when seemingly every waiter and grocery-store clerk had a stock portfolio, did you get rich day trading? Back in those good old days there was plenty of talk about making money day trading, but how many people do you know who actually accomplished it? One look at a 10 year Nasdaq chart leaves no doubt that some people did get rich on the way up–and a few of them probably had the good sense to get out before it was too late. But most people ‘played’ the market–and lost–through mindless buying of mutual funds, and by accepting worthless corporate stock options in lieu of actual pay.

Fast forward to 2007. The Dow is at its historic high and the Nasdaq is roaring back to life. It doesn’t take a genius to realize that now is the time to think about trading again. But truth be told, most people will not take the initiative to make their own trading decisions. Most people will get burned all over again.

To really profit from the coming bull market you must commit yourself to making your own trading decisions. Don’t trust your broker, your boss, or your brother-in-law. Only by assuming responsibility for your financial future can you expect to achieve success; nobody is in a hurry to do it for you.

Most people who do decide to trade on their own hook will naturally think of day trading. And you can bet when the bull market takes off plenty of pundits and gurus will be urging you to day trade. But for most people day trading isn’t a viable option, either because they can’t afford to sit in front of a computer screen all day, or because they have enough common sense to realize day trading is a lethal game. So how can you profitably trade?

The answer for many people is swing trading. Swing trading is the practice of holding stock positions (long or short) for a few days to a few weeks. You don’t need to sit in front of your computer all day with your finger on the panic button, and you don’t have to play cat and mouse with market makers looking to hang your scalp on their wall. The typical moves made by a stock during a swing play will dwarf the tweenies that day traders salivate over, and with sensible use of stop orders you won’t need to lose sleep at night fretting about the risk.

Day trading is a little like the World Series of Poker. Do you think you could sit down with Greg Raymer or Chris Moneymaker and beat them at a hand of No Limit Texas Hold ‘em? When you day trade you’re taking the same chance. The people on the other side of your trades are professional market makers. What the stock will do in the next day, week or year may be beyond the control of any one person, but what happens in the next 15 seconds depends entirely on the decisions of individual traders. Your loss is their immediate gain, and these guys (and gals) have been doing this for a long time. Even the most perfectly formed setup quickly turns into a sucker-play because these professionals know the newbies will take the bait. In the world of day trading, the losers get their hat handed to them in short order.

With swing trading you get the same fair chance as everyone else, institutional traders and individuals alike. As long as you trade stocks with a reasonable amount of volume, you can rest assured that no one trader, or even a group working in unison (which would be illegal, to boot) has the resources to bully the market. Setting your stop 5% below your entry point virtually guarantees that you won’t get scalped (it doesn’t guarantee the stock won’t move 5% against you, but if it does it won’t be because one trader decided to scalp you). And the profit potential for a well played swing trade could be 10% in a few days, or maybe 20-30% in a few weeks. Of course, it takes knowledge and experience to identify the right trades, but your chances of success are just as good as any Wall Street trader if you’re willing to take the time to ‘plan your trade and trade your plan.’

Truly outstanding bull markets only come along a few times in a lifetime. Swing trading gives you a realistic chance of profiting from those great bull markets. You already missed the last one in ‘99. Don’t miss out on this chance. Now is the time to start studying up on swing trading so you’ll be ready.

Author: Todd Strickland
Article Source: EzineArticles.com
PCB Prototype & Manufacturing

Can A Day Trading Penny Stocks Newsletter Provide You the Day Trading Stock Tips You Need?

Keep hearing about day trading like it is some kind of game people play to make money? Wonder how anyone actually makes any real money with something called “penny” stocks? How are people buying penny stocks and where do they find the penny stocks lists they use to succeed? Do you need an online trading broker?

Doubling Stocks provides you with a successful, acclaimed and established weekly email newsletter featuring good stock picks on day trading penny stocks. Instead of just abstract advice, Doubling Stocks tells you the specific stocks to buy and why, then tells you exactly when to sell them to maximize your profit.

Michael Cohen and his father John Cohen have been providing successful good stock picks for decades. Michael Cohen carries on his father’s legacy in a program renown for its uncanny selections on day trading penny stocks by such esteemed online sources as Business Week Online, Interactive Investor and Entrepreneur. My Doubling Stocks review will reveal my hands-on experiences with the newsletter and caution you about any possible shortcomings.

One indisputable value of Doubling Stocks is that it offers you a full eight week 100 percent risk-free trial. You don’t even need to bother with my review if you can just try it out yourself without risk and immediately start day trading penny stocks with Doubling Stocks’ good stock picks. If after eight weeks you decide you don’t want to buy Doubling Stocks because it hasn’t provided you with day trading stock tips that work for you, you get all your money back, no questions asked.

If you choose to stick with it, you pay 49.97 just once: you never need to renew or pay anything more ever again and you’ll receive the Doubling Stocks email every week for however long you wish. Different methods work for different people, so if you really want good stock picks and you’re determined to succeed, there’s absolutely no reason why you shouldn’t try mastering day trading penny stocks through the Doubling Stocks newsletter. You have nothing to lose with the Doubling Stocks trial, but if you don’t join soon you may miss your opportunity to join the newsletter. Michael limits the number of subscribers to his newsletter.

Day Trading Penny Stocks: Day Trading Stock Tips to Get Rich Quick?

Make money online and get rich? Sure. Get rich QUICK? In short, no. Don’t fool yourself here. Doubling Stocks will provide you the good day trading stock tips you need to begin mastering day trading penny stocks, but it requires you follow through and accept some risk. In my three months with the program, despite few home runs, more than 3 out of every 4 picks made me money. But that means one in four picks didn’t succeed. This is simply the nature of day trading penny stocks and no matter how many good stock picks you’re provided, you will have to steel yourself for an occasional risk. I do strongly suggest you stick with it for a few weeks. You’ll refine your trading wisdom with each newsletter arrival and any issue could suddenly provide the pick that really makes it all click for you.

The great news is that we are dealing with day trading “penny” stocks, not trading hundreds of shares of Microsoft or Exxon. When you start, you can easily limit your risk to pennies. Even if you’re completely new to investing and have very little money to start, Doubling Stocks starts you slow, then you can reinvest what you’ve made until you’re making some serious profit through day trading penny stocks.

Although I found it a benefit, one possible criticism of the newsletter is the no-nonsense approach Michael takes towards trading stocks. Like any business venture, you need to put in some time researching the topic a bit for yourself, because Michael is more interested in very direct and explicit good stock picks. You won’t see him wax philosophical too often. “Just the picks, ma’am.”

Will This Penny Stocks Newsletter Really Work For You?

As long as you put in a reasonable amount of effort, I really do think it will. Why? Because you have John Cohen’s lifetime of wisdom and Michael Cohen’s savvy and diligence providing you all the research and good day trading stock tips you could possibly need to succeed. You will need to put in your own work, but I found it remarkably simple and quick to begin making a bit of money right away with Doubling Stocks. You need to stick with it and reinvest your earnings slowly, but eventually you will reach some serious profits by day trading penny stocks.

I’ve tried a few different online programs and bought a few day trading books on Amazon. I am sure some of this material provided me some wisdom I do not realize I am using, but they all provided me too much background information and abstract theory. Doubling Stocks provides good stock picks so you can soon profit from penny stocks. You’ll find very little dry, sleep-inducing theory.

Michael Cohen has made millions for many people. He has a loyal following and my time receiving his newsletter illuminated the reasons why: Simple, direct success with good stock picks for day trading penny stocks. But why should you give Doubling Stocks a shot? Because you have absolutely nothing to lose. Maybe you won’t find it as worthwhile to you as it was for me. But why would you not at least give it a shot with the incredible eight week 100 percent risk-free trial? This is not expensive. This is not time-consuming. You have to decide how bad you want your financial independence. You don’t even need to read my opinion when you can check it out for yourself. Go try Doubling Stocks now while there are still subscriber slots left.

And that is one final, important point. If you’re at all interested, just do it and do it now. This isn’t a service open to everyone all the time. Michael closes off access to Doubling Stocks every couple of months because he doesn’t want too many people pillaging his picks and affecting the market. So if you want in, go to it! Start day trading penny stocks now!

Author: Charlotte Simms
Article Source: EzineArticles.com
Home Solar

Momentum day trading can be extremely profitable when done correctly…

Day trading momentum stocks can be a very risky adventure. You can lose a lot of money when you pick the wrong opportunities.

The stockmarket can present you with a lot of hot stocks every day. Some of them are extremely risky while others are not as good as they seem. When you know how to identify and approach the best momentum stock opportuntites, you are able to generate a consistent and respectable amount of money in a very short period of time.

We know that day trading stocks with momentum is not the only way to make money investing online in stock market. But it can be the fastest way when you do it right. We also understand that a lot of people shy away from momentum stocktrading and think that only a few online stock traders can profit from it. It’s true. Only those traders with proven knowledge have the ability to profit consistently from momentum stocks.

You don’t necessarily have to trade momentum hot stocks all the time. But you can learn how to take advantage of them when you encounter the best stock opportunities while at the same time limiting your trading risk.

At ChatHotStocks.com Our hot stock trading methodology will show you how to take advantage of profitable day trading tactics that will improve the way you buy and sell momentum stocks from now on. Take a look at the valuable strategies and bonuses that you will get:

+ $ How to pick momentum stocks every day in an easy and fast way.

+ $ What kind of stocks to look for and how to classify the opportunities for greater trading profits.

+ $ Profitable momentum trading without technical analysis

+ $ What kind of stocks and “opportunities” to avoid and why. Save thousands in losses from trades gone bad in the future.

+ $ The “little details” you should look for before you consider a momentum daytrade.

+ $ Things to consider when trading low float momentum stocks

+ $ Buying micro cap and small cap stocks with momentum.

+ $ Trading NASDAQ stocks or OTCBB – OTC stocks ?

+ $ Getting ready for the trading breakout. Position your self for success.

+ $ Will my market rally last more than 5 minutes or less? What to do

+ $ It’s all about the rally. The rest is just a bunch of elegant B.S. Learn to focus on what matters.

+ $ How to lock in profits on the way up

+ $ Should I hold overnight trading positions for a possible gap up ?

+ $ What to do if the stock rally stops moving.

+ $ Level 2 trading ( L 2 ) strategies for momentum.

+ $ Time frames for trading stocks with momentum, Pros and Cons

+ $ Premarket stock trading strategies and tips.

+ $ Trading momentum stock opportunities during market hours.

+ $ Trading at the open or waiting till the dust settles to make your move. It depends. This can make a big difference in your results.

+ $ Stock trading during lunch hour ?

+ $ After hours trading tactics and tips.

+ $ Become an expert of your hot stock watch list.

+ $ You don’t need to watch the stock market all day. Profitable stocktraders have a better way.

+ $ Stock trading is not a job. Don’t make it another rat race.

+ $ Watching charts and stocktrading all day ? Overtrading is not the way to go. Learn why

+ $ Testing the high probability trading plan

+ $ Stress free day trading tips and strategies for beginners and experienced daytraders.

+ $ Free stock market resources and tools for daytrading on line with our strategy.

+ $ Real examples of recent on line trading opportunities. Learn in a practical way.

Momentum trader strategies worth a constant Gold Mine at ChatHotStocks.com

Like an expert surfer that focuses on riding the big waves as much as possible or a shark that waits for the best moment to capture a big prey, those are the moves that we can show you how to catch every day with our powerful hot stock trading course.

Just picture your self waking up EVERY morning fresh and confident knowing you can spot, validate and take advantage of outstanding momentum trading opportunities that are capable of generating you very profitable results.

Get access to our powerful and disciplined momentum stock trading strategy today at Chat Hot Stocks

Log on to: http://www.chathotstocks.com

Author: Daniel Sheldon
Article Source: EzineArticles.com
Provided by: Wordpress plugin Guest Blogger

Asking day traders to take the emotion out of their trading is like asking an athlete to not be competitive during a sporting event. Anyone that has ever been in either a losing or winning trade knows it’s virtually impossible not to react emotionally when day trading. We have to admit that the emotional rides through the trading day are part of the allure to trade. What we truly should control is our commitment to day trading discipline. Here are 10 rules that can play a positive role in your approach:

1. Have a plan, Trade the plan – The most critical approach to your trading is to have a trading plan and be disciplined to stick to your plan. Your plan should consist of why and when you enter/exit trades, the size of your trades, etc. Stick to what works and repeat it like a machine.

2. Treat your trading as a business – Don’t trade just to make money. Conduct your trading decisions as if you were running a business. Only enter positions when your day trading system tells you to. Don’t just trade for the action. Review your trading everyday – Evaluate why you took trades. Did you follow your rules? Learn from your mistakes.

3. Prepare for the trading day – Setup key support and resistance areas on your charts. Make sure you are aware of pending news that may affect your trading. Don’t trade if you are tired, angry, or distracted.

4. Look at risk before profit when entering positions – It is often said that successful day traders first look at loss potential before profit potential of their trades.

5. Trade what you see, not what you think – You should only trade what your charts are telling you. Avoid directional bias. Don’t continue to trade against a trend because you think “it has to reverse”.

6. Follow strict trade management as soon as you enter a trade – Take small profits as your trade runs positive. Stay focused when you are in a trade and be prepared to move your stop losses as the trades require.

7. ALWAYS use stops – The number one ruin of day traders is trading without stop losses, or moving your stop losses as the price nears. Set them as soon as you enter a trade. If you get stopped out of three consecutive trades you are out of sync with the market. Walk away for 15 minutes and come back for a fresh start.

8. Take losses – Until you can accept stopping out of losing trades, you will not become a consistent, profitable trader. No one wins every single trade. Cut your losing trades according to plan.

9. Take profits – Nothing is more frustrating than watching a winning trade turn into a loser. Small consistent gains will add up. You will fail in the long run if you always swing for the fences.

10. Don’t over trade – One effective way to avoid over trading is to stick to your discipline of only entering highly probable trades. Set a daily goal and quit when you reach it.

Have fun! – Profitable trading will reinforce your discipline and increase your confidence. Enjoy the ride.

Author: Armando Pena
Article Source: EzineArticles.com
Provided by: Canada duty tariff

What is the 30 Minute Bias Indicator and how can I use it?
What is the Bias Indicator (BI)
The Bias Indicator is basically based on the share price opening range
We will investigate:
How to select stocks to trade
Entry tactics
Stop loss settings

The Bias Indicator is defined in terms of time and price. The time element is simply the first X number of minutes in the trading day. The number of minutes used to define the Bias Indicator is your decision as a trader. I define the Bias Indicator as the first 30 minutes of the trading day. I have found this period to work the best for my strategies that are geared towards day trading.

I will focus on the 30 minute BI because I think that this is the best time frame to use for Day trading. I believe that the market tends to experience a reversal period around 10:30 A.M., as many reports are released between about 9:30 A.M. and 10:30 A.M. Fund managers also seem to start their daily inputs around this time. So the 30 minute BI includes both of these factors.

The price component of the BI is the day’s trading range at the end of the BI time period. This means that the 30 minute BI is defined as the stock’s high and low for the day at 10:30 A.M.

The BI is not the opening price. In fact, the opening price is not a factor in calculating the BI. For example, if BHP were to open at $26.49 and then sell off to $26.06 at 10:15 AM and then reverse and rally to $26.86 at 10:30 A.M. the 30 minute BI would be the day’s range at 10:30 A.M. or $26.06 – $26.86. This is because during the 30 minute BI period $26.06 and $26.86 were BHP’s low and high, respectively.

Note: I said the day’s range at 10:30 A.M., not the range for the whole day.

The easiest way to mark the Bias Indicator Range is to use an intraday candle chart, set at 30 minutes interval. The first complete candle then gives you the Bias Indicator Range. Draw a line on top of the candle and one on the bottom of the candle and you have today’s BI marked on your chart.

As you can see, defining the BI is easy. The 30-minute BI is strictly the high and the low of the first 30 minutes of trading. I find that the BI often reveals the bias of a stock for the day.

Why is the Bias Indicator so powerful?

The fact that the BI is assessing such an informative period means that it can often determine the bias for the day as being bullish, bearish, or neutral. The BI represents how the bulls and bears establish their initial positions for the day. A move away from the BI indicates that one side is stronger than the other. A stock moving above the BI means the prevailing sentiment in the stock is bullish. The manner in which the stock breaks above and trades above the BI will indicate the strength of the bullish sentiment. The same but opposite analysis applies when a stock moves below its BI.

A move below the BI indicates that the stock is weak and the bears are in control.

How can we use the BI to help us in our day or short term trading?

The most basic application of the BI principle is that when a stock is trading above its Bias Indicator you should have a bullish bias, and when it is trading below its Bias Indicator you should have a bearish bias.

Trading any breakout from the BI breakout is a simple concept, but there are some considerations to take care of and a few tactical trading approaches to consider.

As discussed in creating a trading plan, before you enter a trade you must know your stop loss point. This is where you will exit the trade in the event that the stock moves against you. The loss that you expect to incur if you exit at your stop loss point is your “risk”. As discussed in money management, the position size is based on this risk calculation.

We have established a range of prices for a particular stock and have drawn the 2 lines on our chart. Of course you can use any good intraday chart, I find the IG Market charts the easiest to use.

Note: For the purpose of trading, I prefer to use a 5 minute chart.

Let us have a look at two practical trading approaches using the BI.

1. Buy the initial breakout
2. Buy the second breakout after a retracement.

What is a breakout? I define as a breakout when the whole 5 minute candle is above the upper line of the range.

First Approach: Buy initial breakout

Entering the market at this stage is the most aggressive approach because it does not allow for any form of confirmation that the stock’s break above the resistance level will continue. Perhaps this strategy should be reserved for the most promising stocks. However it has the advantage of providing, in many circumstances, the cheapest entry point.

Using this strategy, I would like to see the breakout accompanied with high volume, again on the 5 minute chart. The stop loss should be set at the lower line of the range, as drawn in after 30 minutes. I find it best to use an automatic stop loss, as this eliminates all emotions.

However many times you will find that using the 30-minute lower line will often define risk values which are too high. You may have a range of say one dollar, too high to get a decent risk/reward ratio. I this case I suggest you use a stop based on levels the market has defined for you, say a Moving Average level or a support level. If you can not find a stop level to give u a good enough risk/reward probability, it may be better to miss the trade and look for a better opportunity.

So to summarize the first approach:
Buy at initial breakout
Watch for volume
Set your stop loss
Pass the trade if the risk/reward ratio is not good enough.

Second Approach: Buy the second breakout after a retracement

This tactic may suit the more conservative trader. Here you have the opportunity to evaluate how well the stock broke out. You can see how the stock trades above the BI. When using this approach you are looking for the market to create a new breakout after a retracement. As soon as the market demonstrates that a new breakout occurs, you can buy the stock with a stop below that retracement level.

The advantage of waiting for confirmation and a retracement is that you have more information before you enter the trade. You will not get stopped out of a stock that fails immediately after it breaks out. The disadvantage is that not all breakouts retrace. You may of course miss the best opportunity that a particular stock has to offer that day.

There will be a lot of opportunities everyday. Be patient, and get in at the right time as determined by your risk. Don’t take trades late because you feel as though you are going to miss out.

Many times you will find that the stock retraces or moves along sideways until later in the day, then suddenly breaks out again and gives you a good trading opportunity, maybe during an afternoon rally.

To summarize the second approach:
Wait for initial breakout
Wait for retracement
Buy at second breakout
Be patient, often the second breakout happens later in the day.

If you have any questions so far, please do not hesitate to email me.
Email: ejk@tradingaustralianshares.com

Now we shall expand on this subject by looking at
1. selecting stocks to buy
2. refining the entry points
3. how to set stop losses

Ok, let us explore how to select stocks.

I suggest you create a watch list with all the stocks you may be interested in. You can explore many avenues to find interesting stocks.

Most CFD platforms will show you the most traded stocks for the day. It is always good to select stocks with high turnover. IG Markets has a daily listing of top movers, showing last price, % change and volume. This is a very informative source. If you open an account with IG Markets through my web site, I offer you 1 month free mentoring service to help you to get used to the platform and refine your trading skills.

You should also look out for recent news items. Recently I managed some good trades with Asciano, after reading a series of news about the company.

Select stocks with high volatility as these will give you the best chance to make a profit in day trading, but you must have a good stop loss. We discuss stop loss a little later. How do you define high volatility? Simply divide the daily average Trading Range (ATR) by the share price to get a percentage. The higher the percentage, the more volatility.

For example BHP s/p 26.4, ATR 2.02, volatility 7.65%.
AIO s/p 1.55, ATR .371, volatility 23.94%. A huge volatility, good chance to make profit, but dangerous without a good stop loss.

I made myself an excel table, where I can assess volatility quickly.

We should also look for a bullish signal. I always prefer stocks which trade at the same or slightly above the prior day’s close. The prior day’s high is often a potential area of resistance, so when the stock trades above this high it is a bullish signal.

To summarize selection of stocks:
Create a good watch list and check every day.
Scan news to find stocks in the news.
Use the listing of top movers or similar to check every day what is moving quickly.
Look for stocks which are above the prior day’s high. This is a bullish signal.

We said to buy the initial breakout or buy the second breakout after a retracement. When do we enter the trade?

Volume is one of the most important indicators to look for. A breakout with not much volume does not tell us much. If you wish to buy at the initial breakout, look for high volume to accompany this breakout. I also think it is a good idea to wait until a full 5 minute candle has settled above the top breakout line.

If the volume is not there, I rather wait for a retracement and buy on the second breakout.

Can we buy before the share price reaches the breakout point? In many instances we can, but ONLY if the volume increases. Sometimes you will have a high opening price, followed by a quick retracement. This will sometimes be followed by a quick upsurge with high volume. This can be a buy signal, but once again, we must be sure that the volume is strong.

As with any pattern analysis, you will not always find that all of the criteria are met. You must be able to identify quality trading opportunities based on your criteria and use the correct trading tactic to exploit the opportunity. For example, if a stock shows a bullish picture, has relative high volume and has good volatility, then it may be a candidate for a more aggressive strategy of buying the initial breakout.

If the stock does not show good volume or is below the prior day’s closing price, then you should be more cautious and wait for a second breakout.

Avoid stocks that don’t show an easily identifiable trading opportunity. There will always be other opportunities.

Setting a Stop Loss

Setting a stop loss is a MUST. Before you enter a trade you should know your stop loss point. This is the price at which you will exit the trade in the event that the stock moves against you before you are able to take your profits. The loss that you expect to incur if you exit at your stop loss point is your risk. The risk will define your position size.

The low of the BI range is the most logical area of resistance, therefore the point to set your stop loss. However I often find that this gives me too big a distance and my risk reward ratio is just not there. There are a few ways to raise your stop loss point and therefore reduce the risk and find trades with a better risk reward ratio.

I have on my charts 2 Exponential Moving Average (EMA) lines, one is 15 periods, and the other one is 7 periods. Remember, I use the 5 minute chart for my trading. The 15 EMA line is quite good to use, unless the share price really surges quickly. In that case I would use the 7 EMA. I always use a trailing stop loss to lock in profits, trailing it up every 5 minutes, of course never going backward.

Which method you use to set your stop loss will always depend on your risk tolerance.

Very often if my trade shows good profit after a steep rise, I exit once I see the chart flattening out. This helps me to exit with a decent profit, however many times I found that the share price retraces slightly, and then moves higher.

To summarize stop loss techniques:
The low of the BI range
The 15 EMA
The 7 EMA
Exit when the chart flattens out, if you are in good profit.

Remember, trading is 70 percent science and 30 percent art. You must use experience and intuition at all times. Most of all, you must be able to cope with some small losses.

Experiment with the Bias Indicator, you will find it profitable.

If you wish to subscribe to my fortnightly newsletter, please email me with the subject heading “newletter”.

Email: ejk@tradingaustralianshares.com

An opportunity for you
Are you looking for a good CFD platform? Why not get a demo platform from IG MARKETS?
I invite you to open an account with IG Markets through my web site and offer you a free one month membership of my unique mentoring program.
Go to my IG page, register with IG Markets and ask for a demo platform. Once you have opened the account and funded it, you will be invited to join my mentoring program for one month for free, absolutely no obligations.
Just email me on ejk@tradingaustralianshares.com with your details. Don’t miss this opportunity.

Happy Trading,

Eric

Author: Eric Kratzer
Article Source: EzineArticles.com
Provided by: Latest trends in mobile phone