A Typical Trading Day: How to Enter and Exit a Trade
How to Enter and Exit a Trade
There is no magic trick here. There are literally hundreds, probably thousands of ways to enter and exit a day trade. I am just sharing mine that I use for futures trading. I only trade /ES and /NQ futures, which is S&P500 and Nasdaq 100 indices, but the same can be applied to any fast moving markets, like BTC/USDT futures as well. Below is my set up that I use over and over again to trade reversals. I will explain this in detail later.
I typically start the day looking at the longer term chart. Since I only trade this single chart, I know this chart by heart. How much do a daily chart change each day!? Just by a single candle...right? So daily and hourly I have it memorized already. Notice I don't have any fancy indicator on this. I don't need them, you don't need them. Only the price is right, everything else is just fluff (mostly).
|S&P500 Daily Chart||S&P500 Hourly Chart|
The only purpose of looking at this chart is to establish the current trend. I show them by simple arrows. The trend of the market is down. You can do all mumbo-jumbo to establish that, but on the hourly, which is intermediate term chart for me, I just at the left of the window and read the price, and then look at the right of the window and read the price. In this case the right side, the current price, is lower than the left side (several tens/hundreds of hours back). Long term (daily) trend is down, intermediate (hourly) trend is down. This takes less than 2 seconds, sometimes I don't even check, because I know it already. So I move directly to my trade set up at this point.
Trade Set Up
I am using Thursday June 16th example, and using a 5-min chart for trading. I typically look at $VOLD. For details of $vold, I wrote a post couple of years back, and it is still valid. Here I am looking and Wed and Thu. Wednesday was the FOMC rate decision and the relief rally due to that. However, it died down in the Asian session and market resumed its downtrend. $VOLD on Thursday is perfect! All red! Market is going down! I like to trade with the trend, so in this case I only like to look for short set up.
|S&P500 5-min Chart||NYSE $VOLD|
Zooming in to my trading platform. I will give you the real trading example from today, Thursday June 16, 2022.
Short /ES at 3678, as the price drops below the wick of the reversal bar; Stop was just above the high, at 3695 (17 points), and target was 3645 (arbitrary, about 2X the stop, 33 point). I typically like to day trade with 1: 1.5 or 1:2 risk-to-reward ratio.
Yes, so let me explain the first image, my trade set up. This is my modification of key-buy-setup by Velez and Capra (not a good book, don't read). Basically it is a reversal set up. For long, price rally to a new high, and then pulls back (a few red bars, number does not matter). It creates a reversal bar (doji, or not doesn't matter, can be multiple doji). Then as the price trades above the high of the reversal bar, a buy is triggered. Typically with the stop below the low of the reversal bar, target is typically arbitrary, but usually more than 1.5 or 2X of the stop.
Short sell set up is the opposite. Price drops to a new low, and then rallies to a reversal bar. As the price drops below the low of the reversal bar, a short sell is triggered, with a stop above the high of the reversal bar, and targer typically 1.5 to 2X of the stop.
That's about it. Rinse and repeat. No indicator, special tool, exclusive AI based algorithm needed. Balls needed though! Just remember:
- Never Short into a hole
- Never Long a All-Time-High (yes greater fool theory works, but it is a low probability game)
- Wait for a pull-back. Yes, there is always a pull-back.
- Try to long a general uptrend (price above VWAP, if you are confused!), try to short a general downtrend (price below VWAP, if you are confused!)
Disclaimer: This is NOT professional advice, this is all just my own opinion and experience. I am NOT a Certified Financial Adviser. Consult professionals for any financial, accounting or legal related questions you have.
Charts are created in Tradingview.com, which is a free service.