Day Trading Signals
STRATEGY #1: Gap Up - Inside Bar - BreakOut
This day trading signal, as the name implies, starts out with a Gap Up. If the second or third 10 min. bar develops into an Inside Bar, you have a setup.
As an alternative, you might consider stocks that have only partially gapped up as long as they are ranked high on a 'gainer's list'. By partially gapped up, I mean a gap above the previous day's close, but still below the previous day's high. This type can still provide great intraday signals, especially on days when there aren't many stocks opening with a full gap.
I prefer to have only one or two 10 min bars develop before the inside bar, because more than two bars generally means price has moved too far already for this to be an effective setup.
Many times with three or four bars advancing with higher highs, followed by an inside bar, you'll see an upside breakout and then price will very quickly reverse and break below the low of the inside bar. This often turns out to be the beginning of a substantial retracement on that time frame.
I have other strategies coming up, that are better to use once a stock has already moved a good distance from it's opening price.
So once you've got the inside bar, you would then place a buy stop directly above the high of the inside bar. The trigger is the BreakOut above the inside bar.
As mentioned on the stock day trading system page , you should always know in advance where your stop will be placed. You might decide to place it directly under the inside bar, or depending on the range of the inside bar and the low of the breakout bar, you might place the stop under the breakout bar instead.
Once the trade signal has you long and you've got your stop in place, then you have to start thinking about where and how you would like to exit.
That's assuming of course, that your stop isn't hit. If it is, just chalk it up as a loss and move on to the next trade.
No big deal, right? If you've read my page on trading money management and position sizing it shouldn't be.
Lets take a look at some examples of Strategy #1
There's many different exit methods or trailing stop techniques you can use once in the trade. A trendline or support and resistance type exit in the second example below would've exited this trade at around the same price.
Remember, day trading signals are just that....signals or triggers for a trade entry. They are not complete systems until you add your stop and exit strategies along with position sizing on each and every trade.
And always follow this day trading tip -- know where that stop is going to be before you take the trade. Better yet, use day trading software that can automatically place those stops for you and then adjust them if you have to.