Scouting for Day Trades

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Video Transcription:

Hello, traders. Welcome to the Pro Trading Course and the seventh module, Trading Like a Pro. In this lesson we are going to scout for day trades on the forex and the futures market. I think we’re going to go right ahead to the charts and look at the pound/dollar. And as you can see, I already have a trade on the pound/dollar. Well, the reason I already have a trade on the pound/dollar is because I didn’t want to miss this opportunity to shore this market.

And I also wanted to show you that this is really how we scout for trades here at the [inaudible 00:00:38]. The first thing I’m going to do is I’m going to show you past price action on the pound/dollar. You can see that we have been quite in a range market on this instrument, so playing a bounce off this level of resistance was a good idea.

Now, what we’re going to right now is we’re going to analyze price action. Before we start analyzing price action actually I’m going to show you the levels that we are playing with. Right here, we have the current weekly high, which is also our current daily high. The weekly and the daily high are the same, at around 43.46, and we have the daily low at 42.25. You can see that the ADR was 146 pips, and to date we have moved from the daily low to the daily high 121.3 pips.

Scouting for Day Trades

So it was a good play to try to take a bounce trade right here because we already have moved almost the entire daily range. Then we also had the daily resistance one and the weekly resistance one at this level. We had the previous weekly high that also is a very strong level to watch because it’s a level where we are going to be finding sellers in this case, of course.

Now, not only that, but these are only the levels that the indicators are going to show you. But right now we are going to analyze price action. And as you can see right here, we have a level that was broken, then retested once, twice, and then retested again as resistance. We are going to use the wick of this candle as the bottom of the resistance range and the wick of this candle as the entire resistance range.

So we have a resistance range of about four pips, which is excellent on a day trade basis because we don’t want to be playing with such big ranges, okay? Now, I want to say that this is not the best field that we got. Actually a better entry would have been around the 43.12 level, which is 12 pips above our entry, but it’s fine because I really did want to get filled on my trade.

Scouting for Day Trades1

We are going to put our stops above the daily high or above the weekly high, which is the same. We are going to start and look for profit-taking zones. First of all, we’re going to grab a Fibonacci tool from the high to the low, and we are going to see which levels are in play right here with our bounce trade. You can see that the 76.4 is a very strong level on the daily. This is the level that we are going to be focusing on. It’s the level that actually price tested before we bounced back. So basically this is our trade setup. Let me go through it again.

We have the weekly high. We have the weekly resistance one, the daily resistance one. We have a strong level of resistance. We have the 76.4, and I think that we have the 113 of this move to the downside, and we are going to try and see if this is actually accurate. This would have been a very strong Fibonacci cluster.

Remember that you are not going to try to take the trades at the high or at the bottom because sometimes you are not going to get filled. You can see that we do have the 1, 1, 13 Fibonacci level from this high to this low right around this level. So basically, a better entry would have been around the 43.13 level. But it’s fine. We are still in great shape on a trade, and we are risking right now around 50 pips or 53 pips on this trade.

Now, let’s look for areas that we can use as profit-taking areas. We are definitely going to look at the current daily low. The reason we are going to look at the current daily low is because it’s a very pivotal zone, and it has been from the past sessions. You can see right here that this is actually a zone that has been tested quite some time.

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Now, let me put on this magenta trend line. And as you can see, well, price tested here with a huge wick and a huge rejection candle, then we tested it again right here before moving up, and we tested it again here before making these weekly highs. Now, not only that, we have the current daily low right at this level, and we have confluence with the daily period.

Now, what we are going to do is we are going to go ahead and grab on my Fibonacci tool because what we want to do is we want to look at the weekly Fibonacci levels. And because we are in a current up move, we are going to look at the current Fibonacci levels from the weekly low to the weekly high.

Now, what we’re going to do here is we’re going to change the color on these levels, and we are going to use the default levels because what we want to do is we want to see where the Fibonacci levels are at. And as you can see, this magenta level confluences perfectly with the daily low, and the 50, and the daily period. So we are definitely going to take half of our trade here because it’s very plausible that we are going to find a lot of buyers at this level, and price is going to bounce and look for a new hand.

But it can also be that price is going to test this level, then break it, and go down and test the next level. By taking profit here, we are going to be making 70 pips on the first half of our trade, which is absolutely fine because it’s better than a one to one risk to reward scenario on the pound/dollar on a day trade.

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If price breaks with this level what we’re going to do is we’re going to look for the next zone where we can take profits. The next zone that we can take profits, I think it’s the 76.4 around the weekly level. And as you can see, it actually confluences with the weekly level perfectly. If you look closely too, it’s also a very strong zone that has been tested in the past.

So basically we have two zones. We have the daily pip that confluences with today’s low, and the very pivotal zone around the 50 pips natured [SP] around the weekly 50, and, well, for around 75 pips. We have the weekly pivot that confluences with another very strong level that big money is very plausible to be stepping in at the weekly 76.4.

And by taking profits here, we are going to be making 141 pips on the second part of our trade. Basically, this is how you’re going to be scouting for day trades on all of your instruments. Look for zones that confluence with previous basis or previous highs, and look for Fibonacci clusters. Look for Fibonacci retracement levels around these zones, take the trade, and look for intelligent exits on a daily basis.

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