Intraday trading strategies can seem overwhelming but they don’t have to be. The world of trading tries to make it seem difficult to trade. From the verbiage used to all of the alternatives with the way to set up your charts, it can seem neverending. I prefer to keep things as simple as possible. I hardly use any indicators and the ones I do are not used to take trades off of. They are used to be more of a barometer for what price is doing.
In this post, I will show two intraday trading strategies you can use. One is specifically for entries and the other is a strategy I personally use. What you should do is test them and see how you could incorporate them into your trading. Since your trading style will be different then mine (as it should be) then I would test and see if you like them. If they can assist you then awesome! If not then no big deal. Trading is all about trial and error. Finding out what works for you and then finding out what doesn’t so you can cross it off your list.
If you are just starting out with day trading or intraday trading then you can read my beginner’s guide here: https://evancarthey.com/a-beginners-guide-to-day-trading/
Successful Intraday Trading Strategies
The Two Bar Reversal
The two bar reversal is just as the name implies. It uses two bars to signal the reversal.
For a short entry, when you get a close below the high bar you place a limit sell order inside the bar that just closed outside the high bar. For going long, when you get a close below the low bar you place a limit buy order inside the bar that just closed outside the low bar.
The picture below with the red lines would where you would have placed the sell limit order. The green lines would be where you would place the buy limit order.
Obviously, you cannot just enter orders blindly. The chart above was to show where and how you enter the orders. As you can see there will be times there is no way to get into the move. After the bar closes above the low sometimes the price sky rockets up or down. That’s the way it goes at times. There will be moves you miss with this entry system. You can also use filters for the 2 bar entry system such as Fibonacci retracements or extensions, moving averages, trend lines, etc.
What I showed you is just the framework in how to enter a trade. It will help keep you safe and only entering when the price is looking for a pullback. You will need to do your own chart analysis to determine the trend and to decide which way you think the trend is headed.
If you utilize any of the filters I mentioned above then they can be very beneficial for waiting for a pullback to hit one of those filters and then look for the 2 bar entry.
The 123.6% to the 161.8% Trade
For the second of the intraday trading strategies to consider for day trading it involves using the Fibonacci extension levels. For the Fibonacci levels, you’ll need to have the 38% retracement level, the 123.6% extension, 161.8%, and the 200% extension level. You can have others but these are the three you need for this setup that you will trade off of.
For the move, the price has to retrace back to at least the 38% Fibonacci retracement level for the setup to be valid. Once that happens then the first short will be at the 12.6% Fibonacci extension level. When that is hit then the exit you are looking for is the 0% line.
But if the price keeps moving the opposite direction and never hits the 0% line then your next entry level is the 161.8% Fibonacci extension level. Once that happens then you move the exits to the 123.6% level.
But if the price keeps moving in the opposite direction and never hits the 123.6% level for the exit and hits the 200% level then you get in there. Then you move the exits to the 161.8% level. This is the final time you move the exit even if the price continues to move against you. You can get in further at even better levels but the exit does not have to move again.
In the picture above here is a short setup. The blue circle is where the short would have been initiated. The yellow circle is the exit. You can see how the price almost hit the 1.618% Fibonacci extension but barely missed it. Since it didn’t hit we don’t move the exit up the 123.6% level.
In the picture above it is a long setup. The price blew past the 123.6% level. When the price hit the 1.618% level then the exit moved to the 123.6% level. The entries are the blue circles and the exit is yellow. The teal box is showing where the price hit the 38% Fibonacci retracement level in order to make it a legit trade.
Here is the video where I go into great detail about the two strategies from above:
5 Trading Tips
- You can hold your position overnight if you need to. Most gurus who are selling their services or trading room subscriptions will tell you that they NEVER hold their positions overnight. They say they don’t want to be in the market when it is slow but it is all a bunch of bologna. The real reason why is because most of the people who purchase their products don’t have the margin to hold positions overnight. The guru needs the victim to not have extra money to avoid a margin call in order to keep on paying their monthly fees to the guru. The more money the victim has tied up in a broker then the less available money for the guru. Most trading rooms are run by people who lose money trading which is why you never see anyone post their verified trading statements. If you have the margin and are in a good trade then HOLD THE POSITION AFTER THE MARKET CLOSES! If you trade the e-minis then there is great movement during the night. If you know your profit target and if you use an exit then get them set. The takeaway from this is don’t be afraid to hold a position after the market closes.
- Make sure you are over-leveraged. What I mean is you need to have your account with MORE than enough money to cover any emergencies. As mentioned in #1 if you have more than enough to cover 3 contracts margin’s after the markets close but you are in only one position then you are fine. But if you barely have enough margin to cover one contract’s margin when the market closes then you are in trouble. You want to have so much money in your account and trading with such little money that trading is boring. You want to slowly use more leverage. The times I got myself in the most trouble was when I was over-leveraged with my positions. Now my goal is to have way more than enough margin to handle any big moves that might go against me.
You will make mistakes. No matter how long you trade you will make mistakes. You might get in when you shouldn’t or get out too soon or too late. It still happens to me. The goal is to recognize when you have made a mistake and correct it. DO NOT DOUBLE DOWN ON YOUR MISTAKE! Take your loss and move on. One of the quickest ways to blow your account is to try and stay in a trade in order to “correct” it. This will cause much more harm than the occasional winner. Just the other day I got into a trade that I realized wasn’t a good setup that I read wrong. Instead of hoping it came back to even in order to not take a loss I closed my position immediately. The setup after looking at it did not fit my trading setup criteria and I had made a mistake. So I got out of the trade. If this was Evan from 10 years ago he would have stayed in the trade and tried to “correct” it. Fortunately, in 10 year’s time, I have learned at least one aspect with trading.
If you trade the eminis then be very careful during FOMC days. During my 1st attempt at day trading, I was warned to not trade during FOMC days. Of course, I didn’t listen to that advice. What happens most FOMC days is very little volume. The market barely moves up and down. Then as soon as the Federal Reserve starts talking about what they are going to do with interest rates the market goes haywire. Huge swings up and then huge swings down. If you are trading with a 1.5 point stop loss then you are toast. There is no way you can survive those swings. So my tip to you would be to just observe the chaos and then get in when it quiets down. But if you have a trading style that thrives during the chaos and huge swings then FOMC days are right up your alley!
- If you struggle with making money trading the 1-hour, 4-hour, daily, weekly, or even monthly charts then you will struggle to make money with whatever intraday trading strategies you implement. Intraday trading magnifies all of your weakness since you are trading on a much shorter time frame. Everything happens much faster. If you are not yet profitable on slower charts then I highly recommend you hold off on intraday trading. If you do attempt it then yes you will learn a little bit about what works for you and what doesn’t work, but you will more than likely lose your money very fast. Although, I still would recommend intraday trading over joining just about any trading room. The reason why is you’ll learn far more about what works and doesn’t work for you than you would be trying to copy someone who is more than likely a losing trader.
Most Successful Strategy
The most successful intraday trading strategies are the ones you create. There is not one system that is the most profitable system for everyone. Since everyone’s psychological makeup is different then everybody who trades will trade slightly different. No two people in the world will have the exact same trading strategy. There will always be something that makes your trading strategy unique.
The way I truly believe to create your own trading strategy starts with meditation. Here is the post where I show you how I meditate when looking for new trading setups:
The most important thing to remember with intraday trading strategies is they are a reflection of who you are. I do recommend you gravitate towards the types of setups and time frames you enjoy. Just because guru X trades using the 2000 tick chart doesn’t mean you have to. If you prefer the 15-minute chart the use that one. If you prefer using a Renko chart rather than a candlestick chart then use a Renko. There is no right or wrong way to trade. If someone ever tries to tell you that you have to trade a certain way or with a specific time frame then they have no idea what they are talking about.
Once you start creating your own trading strategies and stop trying to copy others you will experience breakthroughs. It may not happen all at once. It may take some time. It took me over 6 months of meditation and trying new setups before I found the first setup that made me a profitable trader. The only way you will fail is if you give up.
When you create a strategy or trading setup then you understand it from the inside out. You fully trust it because you created it. When you try to copy someone else’s style or setups you don’t fully trust it 100%. That is also a big issue as to why hardly anyone becomes a profitable trader from copying someone else’s trading style. Yes, I do believe you should seek to learn as much as you can but at the same time, you must use what you learn to create your own trading setups.
Conclusion
The two strategies I listed above are just two in a sea of trading opportunities. If you think you can incorporate them into your trading then awesome! If not then no big deal.
There is no right or wrong way to trade. The best way to trade is the way that makes you money. That is all that matters. At the end of the day, your goal is to be a profitable trader. Trading is all about trial and error. Trying out new ideas and techniques to see what works for you.
What works for someone else won’t necessarily work for you. Since everyone’s mental makeup is different then everyone’s trading will be different to some degree. Trading is a reflection of you who you are. More specifically, trading is a reflection of your psychology. If you have done the work with meditation then you will be a lot further along at becoming a profitable trader than someone who has not.
If you would like to read some books on meditating or trading psychology that helped me out the most and what I consider the best meditation books for traders, then I have that post here: https://evancarthey.com/best-meditation-books-for-traders/
For other books about day or intraday trading that helped me out the most, you can read them here as they are the ultimate guide for the best day trading books in 2019: https://evancarthey.com/the-ultimate-guide-for-the-best-day-trading-books-in-2019/
Take care,
Evan Carthey
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