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INDICATORS
A Strategic Approach
E
ntering and exiting intraday trades using 47.8.
precision technical trading signals has The chart setup is a one-minute, two-day chart
been popular with both retail and insti- with the time set to display data from 7 am to 4
tutional traders, since it limits overnight pm Eastern time. The reason for showing so much
risk exposure. The primary elements of premarket data is to be able to see gaps, cup pat-
professional daytrading include scanning terns, and trends (with volume) before the start of
for volatile breakouts during the first hour of the the trading session. Focusing on premarket price
trading day, setting specific technical entry signals action helps successful daytraders develop a spe-
to initiate new trades, and using careful risk manage- cific price-based entry strategy for trading once the
ment to scale in and out of positions once theyre market opens. It is usually not a good idea to enter
initiated. Daytrading stocks, eminis, forex, and new positions premarket because of wide spreads
exchange traded funds (Etfs) all require different and lower liquidity.
entry and exit signals. Daytrading round-trip durations should be any-
where from several minutes to 45 minutes per trade,
The two-day high stock cup entry with the majority of stock daytrades from two to 15
The strongest entry pattern in daytrading equities is minutes in length (since the market often pivots in
relatively simple. Entries are set using new high price 10- to 20-minute segments during the opening hour).
breakouts roughly at 0.35 or so above the prior days Many new daytraders hold their positions too long
highs during the first hour of
the market open, following a MCP
cup breakout above a 35-step
Moving average (35)
53.00
(as in, 35-period) moving 52.50
high volume.
50.00
49.50
43.50
by Ken Calhoun Figure 1: Molycorp Inc (MCP) Daytrade. Here you see long breakout signals indicated by an entry trigger 0.35 above
premarket cup high on a two-day high continuation pattern.
Copyright Technical Analysis Inc.
Stocks & Commodities V. 29:6 (16-23): Daytrading Cup Breakouts with Ken Calhoun
INDICATORS
Combining market
internals with specific
daytrading patterns
is an essential
component.
For more information circle No. 9
Bullish cups look like the letter U and are best seen
0.90600
0.90550
usD/CHF long entry #2 at 0.90500 using one-minute premarket ES charts for emini traders.
40 pips above cup high
0.90450 Daytrades for the emini ES are best done using a faster
0.90400 scalping method, in which round trips last anywhere
0.90350 from one minute to seven minutes. Exit signals for long
0.90300 positions include one-minute shooting star candle charts,
0.90250
one-minute hammers for shorts, and/or price retracement
of no more than three ticks against the initial position.
0.90200
0.90150
0.90100
Stop-losses for emini ES daytrades are three ticks, with
0.90050 exit targets of five to 12 ticks.
0.90000
0.89950 Forex five-minute cup breakouts
usD/CHF long entry #1 at
40 pips above hammer high
0.89900 The two strongest forex daytrading long-bias signals
0.89850 are generated with five-minute hammers and bullish cup
5-minute hammer 0.89800 breakouts. For example, in the chart of the US dollar/
0.89750
Swiss franc (Usd/Chf) in Figure 4, you can see the first
long entry signal is set 40 pips above the hammer high
0.89700
It also has the benefit of instilling more confidence to pull As an intraday trader, putting volatility to work for you
the trigger and get into new positions, since the trader knows means using technical signals and nimble risk-management
less capital is at risk. Once a trade starts to be profitable, the tactics to generate trading entries and exits over thousands of
trader can decide to add to it, tighten a trailing stop, or add to trades. Daytrading successfully involves a focused approach to
the winning position. That way, stops can be kept much smaller combining technical breakout signals with position sizing and
since less size is traded during the initial position entries. market internals to make for a strategic approach to trading.