Chart Pattern Day Trading Transcript
1. Title Slide 2. Good day 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 day trading videos and don’t forget to visit marketgeeks.com for your free trading report. 3. Often times chart traders who make the transition to day trading from swing trading look for pattern day trading set ups that worked for them in the past. The problem is many chart patterns that worked for short term traders do not apply or will not work for day trading because many technical patterns such as head and shoulders or cup and handle can take months to set up correctly and may require a holding period of several day or even more once you enter the position after the pattern completes. 4. I'm going to show you a few patterns that tend to work just as well or better when used for intraday trading as opposed to swing trading or other longer term trading methods. What's really great about these patterns is they are formed using daily chart patterns, so traders who are familiar with daily chart pattern analysis will feel right at home making the transition to day trading. 5. The channel breakout is one of the most popular day trading strategies. You simply find a stock or other market that has been in a trading range for at least 2 weeks. You start monitoring the market and wait for a breakout. You can see how a Channel Breakout Pattern sets up in this example. 6. After you find a good range bound channel, you should monitor it daily prior to the opening bell. As soon as the stock breaks the channel you would enter your order. In this example you can see a good breakdown to the downside. You would place your stop loss $0.05 above the entry bar and take profits at the close of the day. You can use MOC or Market on Close orders to that you don't have to sit and watch the market all day. Your entry would be $0.05 cents below the lowest price reached during the consolidation period. 7. You can see the entire sequence on this chart. I only use intraday charts once I isolate the pattern on the daily chart. I typically have both charts placed next to each other so I can see how the pattern is turning out on the intraday time frame and daily time frame at once. I could have gained more by getting out early, but statistically holding stocks till the end of the day produces the best risk to reward. 8. Another very effective pattern for day trading is the triangle pattern. It's effective for two great reasons. The first reason is the triangle consolidates and tightens as the pattern gets closer to ending. This is a great low risk entry opportunity level for traders who want to risk as little as possible while day trading. The second reason why the triangle pattern works well for day trading is because when triangles breakout they are typically accompanied by very strong volatility.
Here is a good example of a Triangle pattern that works very well for day trading. 9. The best type of breakouts from Triangle patterns are accompanied by gaps. You should make this a rule when day trading Triangle breakouts. Notice how the stock gaps up and continues moving with very little retracement. This is the type of momentum you want to see when day trading Triangles. 10. You can see the entire sequence in this particular graph. Don't be afraid of a big gap, it's a strong confirmation that you are on the right track. The entry should take place immediately after the open when the stock gaps up. You would place your stop loss level a few cents below the low that day and the stock should not turn back. The exit is MOC so you don't need to monitor the position during the day too much. 11. Lastly, one of my favorite day trading set ups is the Tail Gap Strategy. I use this strategy often for swing trading as well as day trading and here's a good example of a set up that occurred few days ago. Keep in mind two important things when trading this strategy, the gap has to go against the main trend and the trade has to go with the main trend. I use 10 day lows against the trend when looking for Tail Gap Set Ups. 12. You would place a buy stop order $0.05 cents above the previous day's high price. If the trade doesn't get triggered within the first hour and half of the trading day I would cancel the order. There would be not enough time for the trade to develop if you are day trading and entering orders too late in the day, especially with stocks. Place your stop loss order $0.05 cents below the entry day low. The stock should not come back to that level and if it does the trade doesn't have enough momentum to continue. 13. You can see the entire sequence in this example. Notice that we did not enter right at the open but waited till the stock rallied a few ticks above the previous day's high price. This is a good test to make sure there is sufficient momentum to make the trade worthwhile. Always place your stop loss order a few cents below entry day low and place your profit target at as a MOC or Market on Close Order. 14. Keep in mind that some chart patterns work better for day trading than others. Make sure you carefully monitor the pattern and use the daily time frame analysis to make sure the pattern develops properly. Stick to a few good patterns that produce a good risk to reward ratio. 15. Thanks for joining us for today’s day trading tutorial. Don’t forget to subscribe to our video channel and visit MarketGeeks.com for your free trading report. Wishing you the best from Market Geeks. http://www.marketgeeks.com/pattern-day-trading/ http://www.marketgeeks.com