Typical Day Trade
My trading strategy is designed to work in either bull or bear market conditions. And what makes my strategy so versatile is that when the market gets volatile (choppy) I will focus more on intraday trades as opposed to swing trades. Being able to switch trading styles as the market changes is critical.
My trading strategy has been extensively tested across the board in both bull and bear markets, trading different investments vehicles like ETF’s, futures or CFD’s.
This is a hybrid trading service, in that you get both swing trades ranging from 3-20 days in length and also day trades, for high probability setups. We will take advantage of low-risk opportunities, no matter where, when and in what context the market makes low-risk opportunities available.
My main focus is gold and the US stock indexes such as the Dow 30, SP 500, Nasdaq, and Russell 2K. However, when I see another investment chart screaming at me for participation, I will get us involved.
For example, a couple weeks ago Florida had terribly cold weather that froze oranges across the state. It was a prominent story on CNBC as Orange Juice reached 2 year highs on this particular Friday afternoon. I took a look at the chart and it was screaming at me to short it.
It turned out that one $3,000 contract of orange juice netted $2,800 in profit within 5 hours when the market reopened the following Monday. It’s the odd trade like that which we could take part in.
My trading objective is to find setups with low downside risk and immediate potential for upside returns that far outpace the market.
My Short Trading Setup – Rough Guideline
1. Assuming the trend on 2hour and 1hour charts are down
2. Increased volume during sell offs, and light volume on rallies/rising prices
3. Entry is best at Fibonacci retracement level which is also at a previous resistance level
4. Set Stop just above the resistance level you are expecting the current price to stop. Exit if this top is penetrated and wait for a new opportunity.
5. Cover half of your position just before the investment reaches the first level of support level to lock in gains and reduce overall risk.
6. Once the price of the investment starts to make a new short term high, exit the balance of the position. (This is graphically demonstrated in the charts below).
DIA – Dow 30 Index Fund
This is a chart I sent to members on 2/4/2010, pointing out the market weakness. We had a nice sell-off in the morning and the price drifted up on light volume later in the afternoon.
This low volume drift is crucial to recognize as it tells you the general public is buying. And this is what Big Money likes to see. After they crush the market with their large sell orders in the morning they take a break allowing regular retail traders/investors to move the market back up, before the big sellers start dumping shares again in the late afternoon.Here, I look to short at a resistance level in hopes the big sellers step back in.
DIA – Dow 30 Index Fund – End of Day
This chart quickly shows the two intraday setups for shorting at resistance levels. Both trades worked out well but wait until you see the results of trading with futures or CFD’s shown later.
Anyways, the first short was a great play but we did not see the big sellers step in, which led to a reversal and the price continued to move higher taking us out for a small profit.
The second short had huge selling volume indicating sellers were back in control. This play we held into the close. The next chart shows how this is done.
DIA – Dow 30 Index Fund – Step By Step PlayThe chart shows how these low risk setups should have been traded according to my trading strategy to maximize gains while minimizing risk.
Dow 30 Futures & CFD Day Trading Signals/Setups
This is the same Dow 30 index but it is zoomed out so we can take advantage of the 24 hour price action which the futures market trades.
Here I show the Fibonacci retracement levels which happen to be at resistance levels from earlier that day.
During regular trading hours the trades were the same as the DIA etf above, but with futures trading you can trade 24 hours a day. So with the last ETF trade I wrote about earlier, we only made 28 cents profit per share.
But with futures we could have held this position until it fully matured netting a total gain of 40 cents per share. This is 42% more profit simply by trading with futures or CFD’s.To make things more exciting, there happened to be another fantastic trade that evening that yielded us another 45 cent move. These gains may not sound like much but it equals $1000 – $3000 in profits depending on which investment vehicle you are trading (ETF’s, Futures contracts or CFD’s).
Sample Trade Conclusion:
As you can see this is not rocket science, rather a set of simple trading guidelines and basic money management. The tough part is waiting for a trade to mature or waiting for the next trade. It is very easy to start doing trades for no reason other than you are simply bored sitting at the computer. Waiting for high probability opportunities is crucial.
You can always chat with me and other traders in my private day trading chat room. Not only is it fun but you will learn more about trading and meet many traders who share your same passion.
I have a SPECIAL FEATURE in the member’s area which my web guy is helping me develop. It will be our very own Squawk Box. In short, I click a button and talk live to you through the website for when we are near a buy signal, a sell signal and so on.
Also you can use my new app with my Chat Room and Real-Time Alerts on your iPhone... Very exiting stuff!Chris Vermeulen