Intraday Trading Charts: September 6, 2011
Intraday Chart 1: Slow Stochastic Trading Strategy
If you'll recall the slow stochastic trading strategy does not use the usual method of stochastic indicator crossover. The average is not even plotted for this method. For this intraday trading strategy, the oscillator is simply used to give a relative indication of trading range in conjunction with Bollinger Bands.
Counter-trend type trades are taken when the stochastic and Bollinger Bands are in agreement according to the rules. Exits are made when price retraces back to the 20 sma.
Many use the stochastic indicator lines at 80 and 20 as overbought and oversold boundaries, and that's what we'll do again in this example. But, all beginners should know, that methods such as this work admirably when stocks are in a trading range, but price can continue to trend mercilessly against your trade position when stocks are in trending mode. In other words, the overbought/oversold status of the oscillator can be rendered meaningless very quickly.
OK, lets check out an example of this intraday strategy on Capital One Financial (COF) below. There are two short signals and two buy signals on this chart. You can see that from around 11:00am to end of the session, COF was in a trading range. That in a nutshell is why these trades probably would've performed well in realtime. If the stock had been trending like the S&P and Nasdaq were, the trades might not have done as well.
One of the things you'll need to be careful with if you decide to try out this method is the lack of a defined stop area. I suppose you could use a % stop, but expect to occasionally have price move very quickly against your position if price begins to ride up or down those Bollinger Bands.
Unlike my own trading strategies that use price breakouts, in order to catch these kind of trades efficiently one would use limit orders. Therefore, since price is already moving in the opposite direction to your desired trade direction when the entry is triggered, losses can happen very quickly after an entry.
Intraday Chart 2: Momentum Trading Strategy
The momentum trading strategy tends to produce a lot of trades, so you might consider this as a very short term scalping method. The down side of this course is that it produces a lot of commissions for your broker which they certainly appreciate.
Signals are simple. Trade long or short when the 10 sma and the Williams %R are in agreement. For details, use the link above.
This method is quick to give signals in the direction of momentum and can also be quick to signal trades in a reversal of momentum. And, yes it can cause over trading and losses when price goes into range mode. Just the opposite problem as the stochastic strategy above.
Here's the momentum strategy applied to a 5 minute chart of Eastman Chemical (EMN) below.
Intraday Chart 3: Price Action Intraday Trading
One of the benefits of manually scanning charts during the trading day for price action patterns, is that in addition to trading certain price action patterns as part of a defined trading plan, one may also spot opportunities for profit in real time. Spotting these opportunities is possible once you've put in enough screen time and have enough practice with price action trading techniques.
My free trading strategies and ebook can certainly help, but one must expect to put in many of hours of screen time before becoming proficient at this business of day trading.
One of the reasons that I prefer price action trading techniques to indicators is that it enables you to take an entire chart into account and not just what is happening from some averaged formula over "X" amount of bars.
There's simply no substitute for raw price action once you know how to use it properly. If you keep alert for opportunities, you'll see them on charts each and every day.
I'll show you an example on the same chart of EMN below.
1) Right before 2:00pm, price approaches major resistance on the 5 minute chart. One might think it was going to break out soon.
2) But, over the next four red candles, price falls with increasing volume. This is a strong sign of weakness.
3) Price makes a tall black candle next, but on much lower volume. Price immediately continues its move down toward support on higher volume again without even making an attempt to break resistance made at point 1, let alone the major resistance above (yellow line). Another sign of weakness. At this point, it would be clear to set up a sell-stop order under support in anticipation of a leg down with a minimum target of 74.50.
4) A first breakout trade short probably would've been stopped out for a small loss, but a second attempt would've produced a nice 'multiple of stop' trade.