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Spot Forex vs Futures Market Trading

By
Barry Burns
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spot forex vs futures
Spot Forex vs Futures Market Trading, Best Spot Forex vs Futures Market Trading Advice

Choosing what’s best and works for one’s trading method is one of the many factors that contribute to winning the market, whether it’s on spot Forex vs futures market, etc.

This blog post (and video) will give you some pieces of advice as to what to choose between spot Forex vs futures that will tremendously help you in your trades.

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Breaking Down Our Spot Forex vs Futures Strategy

Welcome my friend to this video on spot forex vs futures currencies, spot forex trading, spot forex markets and a comparison between the two, some pluses and minuses; each have their own advantages and disadvantages. We’ll walk through the difference of spot forex vs futures today so you can make a decision on what’s best for you. But I find that there are some of these things that a lot of people don’t think about or maybe know about and you need to before you make a decision. So let’s go through some of those. First of all, let me give a side note. You can also trade currencies with exchange-traded funds and exchange-traded notes. The problem that I find with a lot of them is that the price action is a bit different and they have a lot of gaps in between the bars. Those are not technical gaps.

It’s just the way that the markets trade. So not real crazy about exchange-traded funds and notes. Even though they’re the really high volume ones surprisingly that I’ve seen for currencies. So I look at the spot forex on the left and then we’ve got the futures on the right. We’ll look at the euro today since that is such a high volume market and I also put the MACD down there in the bottom just so you can compare how the indicators would look as well as price action. Now, as you can see, I’ve got my global crosshairs on here, so we’ll just scroll over bar by bar real quick and you can see, by the way, this is a daily chart, well it gets some Internet stuff, too. But as you can see it’s pretty much the same right now.

Difference Between Forex and Futures

Not exactly, but very much the same from bar to bar. Not too much difference there. Indicator, looking pretty much the same. We’ll scroll forward here, again, go forward here so you can see in advance. So, like for example, this bar right here, you don’t get a spike top reversal bar what we call there, but it’s green and one red on the other, not a big difference. The overall price action is pretty much the same with very minor differences. Now, that’s not always true, but it is true most of the time. So let’s go down to a five-minute bar. Now, we’re looking at a five minute on the spot forex on the left and futures on the right. And as you can see, they are a bit different in here.

There are times when they will be different and the active trading times are pretty close to the same. You can trade either one of these 24 hours a day. So what are some of the big differences? All right, well first of all, even though they have generally the same price movement, but they will have a little difference, both trade 24/7, that’s number two. Now, those are similarities, but one of the big differences as number three where the futures are traded on a central exchange and the spot forex is not, and that does make a difference. In other words, people will tell you the spot forex has all this amazing volume, incredible volume. That is true, but you don’t have access to all that volume because you are not trading all throughout all of the exchanges around the world and through all the banks.

Spot Market vs Future Market – What You Need to Know

Therefore, you have the volume or the liquidity that’s made available to you by your broker. And that should be part of your consideration in choosing a forex broker as well as spot forex broker. Number two is that in general, although this has improved, the spot forex regulatory, standards, and brokers standards have not been nearly as good as that as for the futures market. Now, fortunately, we’ve seen a lot of changes in that, so that’s been good. But even here, as of late, we’ve seen a few problems with that. Keep that in mind as well. The leverage is better with the spot forex market than it is with a futures market in general, although that can vary. So one of the things that that means, well that’s a double-edged sword, right? Leverage can be a good thing. It can be a bad thing.

Basically, the more leverage you have, the more money you can potentially make with a smaller account. But on the flip side, the more money you can lose with smaller size account as well. So we’ve got to really take that into consideration, especially for beginning traders. However, I will say that the advantages of the spot forex market, especially for beginners, is that you are able to trade many lots (micro lots) and what that allows you to do is to trade with a smaller trading account. And that’s a good way after you’ve been learning trading and you’ve been paper trading, simulate trading, demo trading, whatever you’ve been doing. After you’ve got it down, good, you think your methods working, you’ve proven it to yourself in practice and you’re ready to start trading with real money.

Wrapping Up Our Spot Forex vs Futures Discussion

Well, if you trade the futures market, then you have to commit more money than you would in the spot forex market with a micro lot or many lot. So kind of cool that you can trade these platforms to market with less money to help you ease into the psychology of having to trade with real money. And I think that’s one of the advantages there.

One of the things that a lot of people don’t tell you is that at least here in the United States, is that there may be tax benefits to trading the futures market over against equities that would include exchange-traded funds or the spot forex market. So I am not a tax professional. I’m not giving you tax advice on that. I’m just saying that that’s a possibility and to talk to your CPA or a tax professional about that. This can potentially make a big difference at the end of the year as to how much money you actually end up putting in your pocket.

Rubber Band Trade Strategy

So if you found value in this video, spot forex vs futures, if you learned something new or something thought-provoking, please feel free to go ahead and share this video by clicking on the share button below. That’s really the best thing you can do to encourage me to continue to create more free tutorials for you. Also, subscribe to the Youtube Channel so that you can get notified everytime I release a new trading video. Click the thumbs up icon. And even leave the comment. I love your comments by the way, really enjoy those.

As a special offer to you, I’m giving you one of my favorite trade strategies. It’s called the rubber band trade that has a very high win-loss ratio. I’m going to give this to you absolutely free. This is a real trade strategy, I’ll teach it to you in 26 short minutes. Click on the image in the top right-hand corner of this video or in the description below the video. If you’re not watching on youtube, there’s probably a link below or an opt-in form in the side. Once you do that, I will personally email the video to you with the rubber band trade strategy.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on Spot Forex vs Futures Market Trading? Enter your answer in the COMMENTS section at the bottom of this page.

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FREE GIFT!

Also, I’m giving away one of my favorite trade strategies that works in trading the markets. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with the first video.

Those interested in Spot Forex vs Futures Market Trading video that works in today’s markets also showed an interest in this video:
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Top ETFs Trading – How to Find the Best Exchange Traded Funds

By
Barry Burns
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0
ETF Trading Strategy
Top ETFs Trading - How to Find the Best Exchange Traded Funds , ETF Trading Strategy

Finding the top exchange traded funds to trade requires a sound ETF trading strategy. Given the quite complications in the analysis of this market instruments, a consistent, reliable, and top performing ETF trading strategy would be the game changer. However, coming up with such strategy requires a lot of experience in trading these trades. One best way to succeed in this is to stand on the shoulders of giants, right?

This blog post will teaching you my top ETF trading strategy I also personally use to gain profits and win in the stock market. I hope this works for you, too.

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Breaking Down Our Top ETF Trading Strategy

Welcome to this video on finding the TOP ETF, that stands for exchange-traded funds. So ETFs trading is a little more challenging than most people first think and let’s dive into the detailed look of our ETF trading strategy and help you with your trading so that you can hopefully make more money.

What is an ETF

A lot of people think that exchange-traded funds are basically created equal. In other words, if you’re looking at the same sector today, we’re looking at the financials, so here are four different exchange-traded funds that are all tracking the financial sector and you would think, well, if they’re all tracking the financial sector, the point of an exchange-traded fund is that it’s basically an index of a bunch of different stocks in that same sector.

Therefore, all the exchange-traded funds from the various companies, whether it’s Spiders, Van Guard, Black Rock, First Dressed, Guggenheim, Invesco, Janet Hancock, Fidelity, they should all pretty much give the same results. Wrong, they do not! And that’s what this video is all about, to help you see, first of all, the difference and then how to determine which is the best one to trade for you at any given time.

The Premise

Let’s get into the basic premise of our ETF trading strategy and then I’ll show you how to evaluate this for yourself. We are going back 90 days. So this is about three months worth of price action and as you can see we’ve got a big disparity between these four.

So these four are, let me bring these up for you here real quick, actually going to go off the screen there, but the black one is XLF, that Spiders. And then numero dos, you’ve got the blue one and that’s the VFH, that’s the vanguard financial etf. The red one is IYF, and that is black rock. And then the green one is FXO, these are obviously the symbols that you would type in and that’s the first trust, and there’s many more we could have brought up Invesco, Janet, Ian Cock, Guggenheim, Fidelity, others; like I said that just for simplicity, if that will just look at for today.

So different companies that are providing these indexes that are tradable in very different results over the last 90 days. As you can see still we’ve got anywhere from about six point three percent all the way down to three point one to nine percent. So yeah, big difference, right? That matters about a 50 percent difference in your profits.

ETF Trading System

This is not little deal. This is a big deal. This you need to know. That’s why I’m pointing it out to you today in our ETF trading strategy. All right, so why is that? How can that happen when they’re all trading, they’re all tracking, I should say the same industry, the same sector. Well, there are several different reasons for that.

What You Need to Know

It is possible that certain funds are putting or tracking certain stocks and that of others. Another one would be waiting, so some funds will be evenly weighted with all the companies in that index. The same others will give a higher weighting to the higher caps, higher capitalized markets, and so that obviously will make a big difference as well. Another one is how often will they re-balance. So if they are going to say we’re going to evaluate this annually and re-balance the index as opposed to another company that says, well, we’re going to re-balance a recorder of that’s going to make a difference not only in performance but also in expenses and so forth.

And talking about expenses, if you’re trading these, you also need to look at some of the difference with regard to which are the most liquid, which have the most volume – this is especially important if your short term trading. Then you want something that’s very liquid and you also want to look at the bid ask spread, and the bid ask spread can vary quite a bit between some of the various exchange-traded funds out there. So look at that because those are expenses and then there’s an expense ratio as well that these companies chart, so the expense ratio can be quite different and I immediately looked at Vanguard in this ETF trading strategy because I expected them to be the cheapest and they were very low, point one percent net expense ratio, but it wasn’t the lowest. They were the second lowest.

Continuing Our Top ETF Trading Strategy

Then I’ll look to Power Shares. Power Shares are very popular and they had a point six percent net ratio, six times higher. Again, not a little deal, not a little deal that when I looked into it, I found out it was because that they turned over their portfolio more often again. Now how does that affect performance? That’s another thing. Maybe more turnover will actually improve the performance, but you’re paying for that more active hands-on management by their team. So it always out one thing, you can’t isolate one thing over against another. You need to put it all together. So, how do we put that all together? I put together a chart like this. Now, this is called the percentage change chart. So if you look over here on the right, you’ll see that there are no prices, just percentages.

So when you started, I started this particular one. Maybe they need to go over here. There’s a little yellow line there. I don’t know if he could see that very well. Anyway, that’s where it started. So they all started at the same spot. Zero Change, zero percent change because they’re all starting at no change on that day. Okay. So that is kind of our benchmark and we’re looking at which one performed the others and that will vary from time to time. We’ll just refer to the color lines here since we don’t involve the labels up right now. So you’ll see that right out of the bat, the black line performed the best and that’s great. That’s the Spider by the way. And then as it came down, but then the red one held up the best on a down market.

ETF Trading Strategy Recap

And that’s important because then you got to regain that money. And then the black one, you know, here we are now and you can see as we pointed out already, a 50 percent difference in the profits at the end of 90 days. But don’t forget about the draw downs too. That’s important. How much did you end up losing? Now, see the blue one here that lost more than five percent of the move down. Whereas the red one here only lost about three percent. So again, big percentage difference. Remember the difference between three percent or three percent down here at six percent is not three percent. It’s a 50 percent difference in your games. Very important to remember that. That’s how I do it. Use that percentage change chart. I look at this and I look for these markets to perform.

See which ones are under-performing, outperforming. And you can do this with anything. So I’m just doing the example with the exchange-traded funds, ETFsfor trading, define which are the top ETFs at any given time and as you can see it and we’ll change it will rotate so these things like expense ratios and a volume and all of that, they play a part in it, but the bottom line is what’s the performance? Because sometimes the more expensive one could actually help perform because they’re re-balancing and that might actually help the ultimate performance.

Our Favorite Rubber Band Trade Strategy

If you liked this tutorial and you like my videos, then please understand that they’re free. But if you got value, then you actually have a moral obligation to click that beautiful little share button below and share good things with others back. That also helps you because that encourages me to continue to create more free tutorials for you. And if you’re watching this on youtube, please click the subscribe button and you’ll get notified every time I release a new trading tutorial, which is about once a week.

Also, click the thumbs up icon and especially leave a comment. I love your comments. As a special offer to my youtube subscribers, I’m giving you one of my favorite trade strategy, and I call this the rubber band trade has a super high win-loss ratio. I still take this trade myself every time that sets up. It’s a simple trade, I’ll teach it to you in 26 short minutes, so go ahead and get my rubber band trade strategy absolutely free by clicking on the image on the top right corner of this video or in the description below the video. And if you’re not watching on youtube, then there’s probably a link below or an opt in form on the site. Once you do that, I’ll personally email the video to you with the rubber band trade strategy.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on Top ETFs Trading – How to Find the Best Exchange Traded Funds? Enter your answer in the COMMENTS section at the bottom of this page.

PLEASE PAY IT FORWARD BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons.

FREE GIFT!

Also I’m giving away one of my favorite trade strategies that works in trading the markets. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with first video.

Those interested in Top ETFs Trading – How to Find the Best Exchange Traded Funds video that works in today’s markets also showed an interest in this video:
https://www.topdogtrading.com/swing-trading-stock-market-using-bollinger-bands/

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Trading Gaps for Daily Profit

By
Barry Burns
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0
Gap Trading
Trading-Gaps-for-Daily-Profit, stock gap trading strategies that work,

One famous and effective way to trade the market is to use gap trading strategies. However, as it grows ever more popular across traders of all sorts e.g stocks, forex, futures, etc. one has to find an edge whilst using this strategy in order to win the market.

This video will give you insights on how to use a gap trading strategy that will definitely help you tremendously in trading the market.

Was this video on Trading Gaps (Gap Trading) for Daily Profit helpful to you? Leave a message in the COMMENTS section at the bottom of this page. 

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Gap Trading

Hey my friend, thank you for watching this video on gap trading for daily profit. This is Barry Burns with Top Dog Trading and let’s jump right into it. So gap trading is one of those classic techniques that everybody learns normally right at the beginning of their trading career, and it’s a very popular way of trading. It’s very appealing in the sense that it looks easy at first glance and it also was one of those things that don’t work as well as it used to, but that’s not surprising because it is so popular. Anytime anything becomes popular, guess what? That’s right about the time it stops working. Everybody knows about it, everybody starts trading it. And guess what? Most people lose money. So once everyone starts doing something, it stops working. You’ve got to have an edge.

By that I mean you can’t be doing the same thing everyone else does. So here’s the classic pattern that people are always looking for. We’ve got one day here, by the way, these are California Times down here and this is a three-minute stock chart. So you’ve got your open way down here and the previous day closed way up there, and the easy way for gap trading is to just say I’m going to trade it back into the close of the previous day. And Japanese candlestick patterns, by the way, they also traded gaps and they call it closing the window. So it’s really nothing new to the Western world. The Japanese were way ahead of us. They said, okay, windows open and now it’s going to close.

Gap Trading Strategies

That’s great. That’s fun when it happens, but it’s not the way it normally happens anymore. Obviously, it still does happen sometimes. Here is an example. Now, let me show you what happens most of the time these days in another example. If you were to say we closed here this day and we opened down here this day and I’m just going to trade the gap close right away, you’d be a sad little puppy because it didn’t close right away. In fact, let’s watch this whole day. See how and when it closes. All right, so you think, okay, I’ll just trade it later in the day. There’s the end of the day and it still didn’t reach the gap close. There’s the line right there. So one of the questions when it comes to technically how to trade this is where do we put the line?

Gap Trading Techniques

So in looking for the gap to close, technically you would say we should do it on the previous day’s close because that is literally closing the gap; closed at one price one day and then it opens at another price other day, and you’re waiting for it to close or get back to the close of the previous day. That’s not the best way to do it. The best way to do it, in my opinion, is to look for the little low there and that’s just a more conservative way to trade it. I’ve seen many times where if you put it at the close or the last bar, it could be a green bar and maybe the close would be up there. And the markets are not perfectly neat because you’ve got millions of people all over the globe trading in 10 different things, time frames, etc.

Intraday Gap Trading Strategies

So don’t expect to get to the exact penny, pip, pixel on your chart that you wanted to get to. Allow for that messiness to be conservative and place it at the lowest low there. Wait for it to come back into that level. Okay, so now that we have established that technique, here’s the other thing that I want to share with you. After the market gaps, quite often what happens is it goes sideways for most of the day. In fact, here’s what would happen, there you go, big move down with our nice gap. And it goes all the way down and, actually, it goes all the way down there in the first three minutes. So from there to there in the first three minutes, what happens the rest of the day? Not a whole lot of anything. It just kinda goes sideways.

That is what normally happens. Now that is the norm. That is what you will see more days than not. And remember trading is about trading probabilities and we never know what’s going to happen. There are no certainties. So we’re trading probabilities and this is the probability scenario and part of the reason logically is because after the market has a big move down, and remember this is not showing any pre or post market data because if you show pre and post-market data, you won’t see the gap. There’s been trading that’s going on overnight there or early in the morning before New York opens and now. So what’s happened is a bunch of people shorted and when the market opens open outcry and most people are looking at their charts, they’re saying I don’t know, I’ve already missed out on that big of a move.

Forex Gap Trading Simple and Profitable

So whatever I want to do, I want to go short now. I mean the dominant direction is down, but I already missed out on all that. So psychologically the masters are saying I’m getting in too late. On the other hand, the sentiment is bearish. So some people are thinking gap and go, some are going to by thinking that the gap is going to close and you’ve got this conflict. So you’ve got people on both sides in the bottom result, is that after gaps quite typically on a daily or an intraday chart, the market really just doesn’t go anywhere. It just kind of goes flat for the rest of the day. It’s not a great trading market for the rest of the day. So here we go and it’s several days down the pike here about three days later and we get another gap.

So from there to there, do we get a gap close if you’re going to trade the gap close and maybe even wait for the peak there to come back down? Nope, sorry. You are not going to get it. The whole day goes by and the gap does not close. So what does happen? Well, just what I said gaps up and now you’ve got conflicting views in, therefore, the market goes sideways for most of the day. It finally does go up. But again it goes up in the afternoon. So if you are going to look for a market move after a gap, usually it’s going to be after lunch. And that’s exactly what this is. This is 1:00, New York time, 10:00, California time. And where does it go? It goes back to this blue line. What’s that Blue Line?

Stock Gap Trading Strategies That Work

Well that Blue Line, if we scroll back, that’s where this gap started. So the gap does close eventually. It took three days for that gap to close. Therefore what I recommend is that you do put these levels on your chart and make them something unique, like a different color. Whatever color you want to mean something to you, but just that you don’t use for anything else. So you might use something that stands out. You’re not going to use it for other support resistance levels. So let’s say you want to use Golden Rod. Okay. And we’re going to make it a little thicker so it really stands out and that whenever I see that line with that thickness, I know, oh wait, that’s where a gap close would occur.

And it is acting almost like a magnet really that yes, the markets are very aware of gaps. The masses are aware of gaps, no question about it. And for that reason, they do tend to have a self-fulfilling prophecy. So I put it on there, but I don’t expect this necessarily going to feel in the first day or even two. In fact, let’s look further. Let’s take that puppy off of there and let’s look at some further examples here. We get another gap here. That’s open and that doesn’t close. There’s your gap from the previous day. Okay, so that one doesn’t close and we do not close that day. Let me just put a line on there. Again, make this clear for you. So there I would put it there. See now this day we closed here, but I wouldn’t put my line there.

Gap Trading Techniques

I’m going to put it down here just to be conservative. Then now look what happens, this is cool. Let me get this all on one chart so you can see. We gapped down this day. We don’t feel that gap that day. Again, notice how the market kind of just goes sideways for most of the day. Then the next day they get fills, but you don’t really have a chance to take the trade for the gap fill because it gapped up into the gap, fill gaps down, and then it gets back up into the gap fill type. Well Great. No opportunity to take that trade unless you are trading overnight. Again, can we get the same dynamic here that I was talking about? A pretty good gap up. Okay. Goes Up. And then what’s it do for the rest of the day? Just kinda goes sideways.

Sorry. Not really anything. Say you need to do. If you didn’t want to do something, it’d be in the afternoon. Take that a little move there. So now this level, it’s not only a gap close, but it is a support level. The market bounces off of it, comes back again as support and bounces back off of it. All right, goes back on up and let’s see. There we go. Get another one. Good fact. We’ve got two more. So let’s look at these real quick. Got a gap up. the market doesn’t really go up much. From there it goes kind of sideways, does not fill the gap next day. Gaps up, it’s a gap and goes up. But again, what most of the day after reaches a tie. It’s just going sideways. The afternoon. You get your movement where it breaks out.

Rubber Band Trade Strategy

All right, well if you liked this video, please understand that it’s free. But if you got value from it, please you have a moral obligation to pay it forward by sharing it with other people. Click that beautiful little share button below. It’s a really pretty nice little button there and you will feel good. You will sleep well tonight. If you click that button knowing you did the right thing, and that’s really the best thing you can do to help encourage me to create more free tutorials for you. Click the thumbs up icon.

And leave a comment below. I love your comments, by the way, they really encourage me as well and I’m giving away one of my favorite trade strategies, it is called the rubber band trade, which has a very high wind loss ratio. Simple trade. I’ll teach it to you in about 26 short minutes. Get my rubber band trade strategy absolutely free by clicking on the image in the top right corner of this video or in the description below the video, and if you’re not watching it on youtube and there’s probably a link below or an opt-in form on the side. Once you do one of those choices, I’ll personally email the video to you with the rubber band trade strategy.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on Trading Gaps (Gap Trading) for Daily Profit? Enter your answer in the COMMENTS section at the bottom of this page.

PLEASE PAY IT FORWARD BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons.

FREE GIFT!

Also, I’m giving away one of my favorite new Trading Gaps (Gap Trading) for Daily Profit tutorials. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with the first video.

Those interested in Trading Gaps (Gap Trading) for Daily Profit video that works in today’s markets also showed an interest in this video:
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Best Technical Indicators For Day Trading

By
Barry Burns
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0
best technical indicators
Best Technical Indicators For Day Trading using Bollinger Bands and MACD Indicators

There are hundreds of what claim to be the best technical indicators for Day Trading and swing trading. In this post, we’ll be discussing how to use Bollinger Bands and MACD Indicators in combination to help you in trading whether on stocks, futures, ETFs, etc.

Was this video on Best Technical Indicators For Day Trading helpful to you? Leave a message in the COMMENTS section at the bottom of this page. 

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Best Technical Indicators For Day Trading

Indicators for day trading are a dime a dozen, we’ve all seen a million of them. And today I’m going to show you something that by the way also would apply for swing trading and, um, even long term treating frankly, if you put this on a monthly, weekly charts, you could do this for some real long-term trading and even investing, but today we’re going to show it to you on day trading examples and the indicators that we’re going to be using are the MACD and the Bollinger bands. These are some of the best technical indicators for day trading is that we’re going to use them in combination with each other. So it’s going to be an indicator of an indicator. Now, what did Barry mean by an indicator of an indicator? Good question.

So, normally, when we are using Bollinger bands, were using them on the price bars. And that’s fine. I like to do that too. However, what we’ll do today is we’re going to look at MACD and by the way, the MACD settings that I’m using here is the standard 26, 12 and 9, and that’s what these red little Dots are. I put a plot of them as dots just so that I could see them very clearly, they would really stand out over against the lines of the Bollinger bands. Anyway, you can customize that however you want, but we are creating here instead of Bollinger bands of price, we’re creating Bollinger bands of the MACD indicator and the Bollinger bands are set again at the standard setting, which is generally two standard deviations of a 20 period moving average.

Best Combination of Indicators for Day Trading

Okay, so it didn’t really change any of these settings on the indicators, although we can play around that without if you want to as well. We’re creating a Bollinger band of the MACD instead of a Bollinger band of price action. How do we apply that? So here are the kinds of setups that I look for and give you a couple of examples on how to use these best technical indicators. First thing I will say is, since we’re talking about day trading today, and this is a three minute short, by the way, it doesn’t really mean it does matter, but, the first thing I want to tell you is that since we’re day trading early in the morning like this, I find that these signals are not necessarily as reliable. So I don’t take that first impulse move generally but I’m not going to tape because it normally doesn’t follow through.

It’s just sometimes they do, sometimes they don’t, but we’re trading probabilities and they find that most time it doesn’t. Therefore, I’m waiting for the next move. Now, what am I waiting for? I’m waiting for the typical kind of boundary band squeeze pattern where the upper and Bollinger bands squeeze together, right? They come close together just like that. And then the MACD hits the upper or lower level and I’m looking for that to then go long because we’re looking at this as a low volatility on MACD, and then we want it to start expanding and go to a high volatility. If it hits the upper one, we go long, if it hits the lower one, we go short and as you can see, sure enough, nice impulse move there. Got It. Nailed it. Now another thing to look for.

Day Trading Indicators Patterns

That’s the basic signal. First of all, that’s the basic signal. Now, the secondary signal you want to look at is, for example, here, we put in a high and look what happened, high on price, but look at a MACD, it pulls away from the Bollinger bands, right? Stops riding them. I call this riding the Bollinger bands. And then it lets loose of them. So that’s a nice indication of, that’s a high probability high and you get kind of the same thing down here, except we didn’t get an entry into that move, but here you might think maybe I should go along, maybe I should go short, but no, because the MACD doesn’t touch the lower Bollinger band. That is essentially telling us that the market is not making any strong impulse move to the downside and, therefore, not really going to be a great trade.

And again that proved to be very true or could just kind of go sideways after that. Plus we don’t get the Bollinger bands to squeeze there. So let’s move forward here a little bit and again. What happens? We get these same patterns. Bollinger bands squeeze there, right? You gotta wait a little while. So the first time when we get this, you might say, well, but it hits the lower Bollinger band here. Yes, it does, but we don’t want to go short. Why? Because the squeeze is still just starting. So we want to take the trade out of the squeeze, not at the beginning of the squeeze, so we wait for it to get in there and then we for forward to start expanding and what you want to see are the Bollinger band starting to separate to part.

Best Technical Indicators for Day Trading Stocks

So, when the lower goes down, the upper goes up, and then whichever one it hits, that’s the one that we’re looking for and momentum, remember MACD is, essentially, well traditionally it’s called a momentum indicator, but it’s really more of an acceleration or velocity indicator. But yes, we get a nice impulse move there and we are golden. So the type of trade, this actually is a volatility trade, but instead of using the Bollinger bands on price, we’re using it on a momentum indicator and it can sometimes give you different signals. Now, let me show you a couple more examples because I want to keep you out of trouble. It’s very important to learn the details of this. So we got it here. We went long and notice the same pattern, we put in a high. What happens is the MACD pulls away from the Bolinger band.

Then we come back here. Now again, you might say, wait a minute. If the upper Bollinger band, I should go along. No. Why? Well, we already told you because the Bollinger band is squeezing together. The upper and lower bands are moving toward each other, so we don’t want that. Same thing here, they’re really just still kind of going sideways. And then now here it does go up toward the end of the day. In fact, that is the end of the day. We do get a little bit of an up move at the end of the day. One last example for you just to bring home the lesson. So again, beginning of the day, right? That’s this horizontal line is the beginning of the day. Just to be clear, by the way, these are California times down here. So again, we get the impulse move down.

Day Trading Rules

We do hit the lower Bollinger band, one of the best technical indicators. A couple of problems, number one, our rule is that first, impulse move at the beginning of the day, normally not good. Number two, it does touch the lower Bollinger band, but look, we’re not in the squeeze, right? We don’t have the squeeze first, so it’s disqualified on two counts. Now, here we do have the squeeze but we don’t want to take it right away because the squeeze is just starting. So the two Bollinger bands are coming together. We wait until they start parting and we get a little bit of a down move there. Now watch this, it comes back up, does not touch the upper Bollinger band, it comes up, comes back down, and it does make another impulse move down, right? The squeeze happens, look at this. If you could see this, that moves up.

This one moves down, talking about the Bollinger bands. After which, this goes sideways for a little while. Then this is a point here where the Bollinger bands are clearly moving in opposite directions. They’re spreading apart, we got a momentum move, and we’re golden. So sure enough, again, one last thing, just to reiterate, we get a nice divergence there, it’s not really a divergence, but just MACD pulling away from the Bollinger band which means it’s slowing down. And then we wait for a nice candlestick pattern, we wait for resistance seeing that’s what you’re looking for, the confluence of time and price. We’ve got resistance, we got momentum slowing down slightly when resistance is going to hold – when momentum slows down because price tends to go through resistance when it’s moving on strength and it tends to bounce off of resistance when it’s moving up on weakness.

Rubber Band Trade Strategy

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