Hi folks,
I just wanted to create a quick step by step "How-To" post on capturing day trading opportunities. Since volatility has turned up in the markets I figured this would be a great time to explore this topic!
Each morning I send out a pre market morning tweet to Art of Trading private community members, usually this includes a day trading idea for the day! Art of Trading private members look forward to these pre market morning day trade ideas!
Lately we have been focusing on Red to Green (R2G), Intraday opening gap fills and Green to Red gap fills. I don't "officially" alert day trading setups because the pace in which some of these setups move is just too quick and by the time the alert has been sent and posted, even just moments after the setup has triggered it could have already made a +2% - +3% move.
Our core strategies and alerts are built around swing trading but I do share potential day trading setups like the examples provided below. Many Art of Trading members use the outlined AOT day trading methodology (protocol) to turn these trades into their own. We're going to cover this in this educational step by step guide, below!
Since we focus on these setups frequently, Art of Trading members have many prior examples of what to look for in these setups. They use these prior examples and experience to execute on these setups themselves.
Last week (August 5th - 9th 2024) was a particularly strong week for our day trading strategies. I would like to share some highlights of that here.
Before the market open on Tuesday we identified $SOXL as a potential R2G candidate for the day. It wasn't just as simple as waiting for the stock to trade back into green territory and getting long that "signal". Volatility played a big role in this setup and its part of the reason why we wanted to wait for the gap up to fill!
$SOXL gapped up and then faded lower to fill the gap, then went red. Shortly afterwards it reversed back up to go green. The reversal from Red to Green (R2G) is the trigger to enter the long position. Not only did it reduce overall risk on the day trade it gave a strong 5 minute low right near the previous day of closing support, $27. The ideal stop would sit just below $27 on this day trade. Which corresponded with the price action from this day and Monday. I tracked and personally traded the move that day. Here was an update to Art of Trading private members:
The trade continued to progress throughout the day and make strong headway into the 8% - 10%+ target from entry. In volatile market conditions it is especially important not to overstay your welcome. Once $SOXL hit our upper targets we used this opportunity to book some profits and cover risk!
Into the close $SOXL began to fade. Which is fine but its important to remember don't turn trades into something they aren't in volatile conditions. We used this as an opportunity to close the trade and go into the next day open minded! Here was the final update on the $SOXL trade!
Wednesday August 7th - $ASTS
Going into Wednesday we had our eye on $ASTS for a potential Gap Fill R2G move just like our $SOXL execution on the previous day. I actively scan the market multiple times a day so I can be prepared for potential trades into the next day! I make sure to share these ideas with Art of Trading private members well in advanced so they can prepare their own strategies.
Wednesday morning opened and $ASTS continued to be a strong candidate for our Gap Fill R2G trading strategy. This remained our focus for the day:
Using a 5 minute timeframe to spot our entry $ASTS quickly made an opening low of $19.38 and swiftly reversed back green. This was the window for entry. Sometimes these types of moves happen very quickly so its important to have your plan solidly in place. The stop loss on the trade would fall below $19.38. In this case somewhere around $19.20 - $19.25 would be best. About a 1% window from the low!
$ASTS continued to push higher allowing Art of Trading private members to capture the 4% - 6% gain we had been targeting earlier in the morning!
Thursday August 8th - $AXON Review
Thursday didn't present any high quality day trading opportunities so I spent some time reviewing a potential trade that we had missed this day but still fit our R2G strategy. This setup was a Power Earnings Gap R2G. $AXON. I shared some thoughts with Art of Trading private members on the setup and how they could have potentially traded it!
I broke the classic Power Earnings Gap R2G setup down step by step:
Step 1: Gap up open after a big Power Earnings Gap candle the previous day!
Step 2: After the gap up open stock quickly faded lower to red!
Step 3: After the stock creates a low within the opening range plan a stop loss about 1% lower from those lows. In this example $340 is perfect!
Step 4: At this point look for a R2G (Red to Green) move which happened here. This is the trigger to enter a long position!
Step 5: The best trades work right away! Once this $AXON move started to print and accelerate higher after the R2G you should have already been thinking; This should be a big mover!
This sort of educational study helps traders identify and anticipate moves before the fact! allowing for stronger entries, lower risk, stronger stops and bigger trades!
I hope this educational step by step post on capturing day trading opportunities will help you do just the same in the future! We have covered these strategies extensively in the past on the official Art of Trading blog! I'll link them below so you can come back here and quickly reference this educational guide in the future.
How To Day Trade a Red to Green Setup!
Don't Chase A Gap Up! Wait for A Gap Fill!
Thanks for taking the time to review this step by step educational blog post! Be sure to check out the extensive catalog of real world trading examples and strategies broken down into easy to read guides on the official Art of Trading blog here: AoT Official Blog
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