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Entry Methods for Daytraders
There are many methods for entry in the market place. Since our focus is on day trading we will concentrate on day trading methods rather than get involved in daily or weekly methods which will be very similar.
1. Present Bar's High. One method I like is when the present bar's high is less than the low of two bars ago. It is a good selling entry. Another, of course is the opposite, a low on the present bar that is higher than the high of the bar two bars ago. It is a good buying entry bar.
2. Upticks Greater than Downticks. Another method that bears watching is when Upticks are greater than Downticks by a factor of say 175% or 150%, perhaps 125%, the close is greater than the open and the close is greater than the previous close. When you get this and a low that is higher than the high two bars ago, you have a solid entry and a definable stop for what should be a good long trade.
The opposite is true as a short sale when Downticks are greater than Upticks by some multiple amount such as listed above and even more so when the high is below the low of the bar two bars back.
(You that have TradeStation can program this easily.)
3. ABC Correction. When we have made an obvious ABC correction upward in a downtrend, selling on a stop below the high bar or the bar after the high bar of an ABC correction is a good choice for an entry.
Likewise, in an uptrend, buying above the high of a low bar of an ABC correction, or the bar following the low bar of an ABC correction, becomes a prudent practice.
4. Buying a Three Bar High or Low. Joe Ross in many of his writings suggested buying a three bar high or low. I personally like to use the high bar or low bar if we have achieved a mathematical level of significance. Significance? Yes, with experience, you will know when you have a level of significance in the Math of the Markets.
5. News and Gaps. In day trading, after the initial bar of the day session we seldom get a gap so we will not discuss gaps at this time as are found on daily bar charts in some markets. We do need to keep in mind that Gap openings on an intraday chart have a high probability, at some point, to return to yesterday's closing area or price. In some markets I have found this to be true as much as 85% of the time. News events may prevent a gap closing to take place.
In considering news events, it is said that 80% of the traders forget the news event that caused whatever movement up or down in three days. And the other 20% of the traders lose because they still are dwelling on the news event that disrupted things as they were. Disrupting news events are difficult to catch and trade as complete chaos generally occurs.
My son pointed out to me that the S & P was at 1370 on Wednesday (Jan. 3, 2001) when the Fed cut rates unexpectedly. I was still setting at about 1303 at the time. So much for "Real Time Data."
6. Sharp Trending Market. Another method is to sell lows or buy highs in a sharp trending downtrend or uptrend. I would only attempt this with a good data feed or after bar range had settled down to a normal range.
Big range bars are indicative of big orders or lots of orders in quantity, so they may be way behind on your quote system.
These are some thoughts to mull over for entry, to make profits in the difficult task of trading for profits intraday.
Copyright 2001 Ralph Russell, Sarasota, Fl.
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