Day Trading With Short Term Price Patterns Transcript 1. Title Slide | 2. Hello Traders this is Roger Scott from Market Geeks with another trading tutorial for you today. Before I begin I want to remind you to subscribe to our video channel for trading videos and trading tips and please visit marketgeeks.com for your free trading report. 3. I'm always on a look out for simple strategies that beginners can apply to day trading with short term price patterns and indicators. One of the easiest patterns to learn and one of the first ones I teach traders is the U turn strategy. The reason I call the strategy U turn is because it's a very fast reversal pattern that works wonders with volatile stocks, futures, currencies and commodities. 4. The U Turn pattern is a short 1 day reversal away from the main trend. When the pattern is setting up it looks like the market is suddenly breaking out in the opposite direction from the trend. However, as the day continues the market quickly changes direction and closes back in line with the main trend. You can see in this example how the stock gaps down against the trend and appears to be heading down. As the day continues buyers come into the market who notice that the stock is substantially lower than its fair value and momentum going in the direction of the trend soon follows. This is a very short term trade that's designed to take advantage of stocks and other markets that are temporarily out of balance. You need to move quickly when you see this type of pattern because they don't last very long. Make sure the breakaway gap day closes near the upper 20 percent of the trading day. You want to make sure momentum is coming into the market the day before your entry. 5. The next day is entry day and this is the most important time because this strategy moves fast and you want to make sure you don't miss the momentum coming into the market. The entry point is above the high that was made on the signal bar which is the gap down bar. The best trades get filled at or near the opening bell so you probably want to place a buy stop order a few ticks above the gap day high price. This way your trade will be filled automatically when the market trades above the gap high day. 6. You can see in this example the entire sequence from beginning to end. Don't forget to cancel your entry stop order if you are not filled during the first two hours of the trading session. Often times traders forget to cancel their open orders and get filled accidently, prevent costly mistakes and keep track of all your open orders. Moreover, don't forget to place your stop loss order immediately after your fill is confirmed. The stop loss level is placed a few ticks below the signal day low price and the profit target is MOC or market on close. This way you get the most opportunity to profit from this position without having to hold it overnight.
7. Keep in mind that you need a strong trending market for this set up to work. I always look for trend lines that slope above 20 percent either up or down. There are several indicators that you can learn about on Marketgeeks.com that discuss how to find a strong trending market so I won't go into this topic in this tutorial. Always remember to trade with the trend, especially set ups that require momentum in the direction of the trend such as this one. 8. The stock pulls away from the trend and appears like it's breaking down for a short period of time. Quickly the stock reverses as buying come in and closes near the upper range of the trading day. This is the type of set up you should be looking for on your daily charts after the close each day. Set ups like this one are ways to take advantage of temporary inefficiencies in the market. 9. Some traders watch the market and enter orders manually when their entry conditions are met while others enter stop orders and get filled automatically. For beginners I recommend entering stop orders and for experienced traders I recommend watching the market and doing it manually. If you do enter entry stop orders make sure you cancel them if they are not filled during the first half hour of the trading day. 10. Here is the final view of the same chart we just saw but using daily charts instead of intraday charts. I always use daily charts first and then once I isolate the pattern I move to intraday charts. For stocks I prefer to use 15 minute bar charts and for E-mini Futures and Forex I use 5 minute charts. 11. The U Turn Strategy is a short term deviation from the main trend. The set up occur quickly and disappear just as quick so you have to find them and take advantage of them as soon as they appear. Use either stop orders or market orders to enter the trade and never ever enter this type of trade if the entry has not been triggered during the first two hours of the trading day. Hold the position till the end of the trading day and monitor the position using 15 minute charts if you are trading stocks. If you are trading futures or forex you can use 5 minute charts instead. 12. That’s it for Today’s tutorial; don’t forget to visit Marketgeeks.com for your free swing trading report. Wishing you all the very best in your trading. http://www.marketgeeks.com/day-trading-with-short-term-price-patterns/ http://www.marketgeeks.com