Day Trading The Trend.

*How I trade short term, daily price trends*

In this blog post I am going to show you how I quickly and easily identify daily price trends and trade them in the short term. As I have previously explained, when markets are volatile and choppy, I like to reduce trade duration and lower the timeframes of my trades. The financial markets are appearing to be more unpredictable right now, specifically the FX markets so it pays to not be greedy.

As always, my technical analysis and charting is done using the TradingView platform which really is a fantastic piece of software. It is cloud based, accessible form any phone or computer device and has all the functionality I need and more. Click on the link below to visit their website.

https://tradingview.go2cloud.org/SH3bP

Let’s start by looking at two separate 15 minute price charts for a major stock market index and analyse the market structures.

Much like when looking for a trend directional bias, you should keep things simple when looking at market structures. If it looks choppy, it is choppy. If price is clearly moving in a single direction then you have a trend. You can use the highs and lows and trendline tool to annotate the charts if necessary.

Top Tip: I use the alignment of the 50 and 200 EMA to determine a trend directional bias. You can also use them for determining the level of choppiness in a market. If the 50 and 200 EMA’s are on top of each other or oscillating and crossing over one another multiple times in short period of time then the market structure is most likely choppy.

I do not like trading choppy markets, I never have and probably never will. I find the unpredictable nature of them and the “messy” appearance often confuses me and my existing trading strategies are just not suitable. However this is not a problem for me. If I see that the price action of a finance instrument is becoming choppy then I will just simply avoid trading it until a trend move begins.

I believe a market structure is choppy when you have a continuous mix of higher highs, lower lows, lower highs and higher lows which therefore producing conflict trend bias’ and multiple weak support and resistance zones with no substance.

Let’s look at a major FX currency pair and I will explain how I analyse the lower timeframe charts to find simple day trading/short duration trade entries.

GBPUSD 15 minute timeframe chart (choppy structure)

Initially you can see that the GBPUSD currency was showing signs of being in a choppy structure. The opposing lower lows and higher highs lead to an expanding pattern and the EMA’S were converging and oscillating close to each other. However, towards the right side of the chart, price did begin to breakout of this structure and bullish momentum was gaining strength.

Let’s look at how this can develop in to an actual tradable opportunity.

GBPUSD 15 minute timeframe chart (with long trade)

The trade on this currency pair is bullish. This is then coinciding with the prevailing trend that has established itself after the market “chop” was broken.

I use a few key points of analysis when looking for day trades. They are all shown on the chart above. I try to make sure as many points of analysis as possible are supporting the trade entry but they are not always all required.

  • Bullish trend (shown by the higher highs and higher lows)
  • Bullish EMA alignment (50 EMA above 200 EMA)
  • Trendline bounce
  • Daily pivot level bounce
  • Support zone bounce

The main premise behind a trend following trade is to buy low and sell high. Therefore I am not looking to buy at the previous higher high but instead wait for a pullback and buy in to the next bullish wave that is likely to occur.

I then look for the price zone on the chart where all of the confluences meet and align. In this trade example it is at the daily pivot level (notoriously used by many traders) which is around 1.23600. In this zone there is also previous resistance which should now act as price support and there is the bullish trendline to also support price.

As you can see, buyer momentum came back in to the markets and price bounced off of the trendline and my “buy zone” and went on to make new price highs later on in the evening of the trading session.

Trade summary.

  • Duration: less than 24 hours
  • Stop loss: 30 pips
  • Profit: 76 pips
  • Return @ close: 2.53R

This style of trading can be extrapolated and used on other financial markets, it is not limited to FX currencies. Let’s take a look at the short term, lower timeframe chart for Spot Gold (XAU/USD).

Spot Gold 15 minute timeframe chart (with short trade)

In this example I have tried to find a set up in the opposite direction (bearish) but still use the same analysis techniques. I always start by looking at the highs and lows on the chart and finding the trend if there is one, then I look at the EMA alignment to confirm.

From there it is a case of selling high, so I find the lower high that for next and sell when price rejections a price zone that is likely to be a good daily resistance. In this case it is the daily pivot level that sits on the previous support zone that was broken so should now act as resistance (blue box).

Trade management for day trading shouldn’t be complicated. I always say, do not be greedy and this works well in day trading. If you are trading a bearish trend then take your profits when the trend is continued and new lower lows are formed and price appears to be bouncing off of a new support. Price might consolidate and fall further but you do not know this, if you have made a reasonable return in a short space of time then take the profits and run.

Trade summary.

  • Duration: less than 12 hours
  • Stop loss: 57 pips
  • Profit: 115 pips
  • Return @ close: 2R

End note.

As always, keep it simple. I use multiple confluences and points of analysis when entering trades but the charts are always kept simple and easy to understand. The main point of this blog post is to reinforce the idea that if markets are choppy or not easily readable then don’t trade. There are plenty of other financial instruments out there to look at.

You also DO NOT need to enter a new trade every day. Over trading is a killer of accounts and one of the biggest problems that new traders face.

This type of day trading is covered in great detail in my Mastering The Markets – Retail Trading Course. I also include an alternative technical day trading strategy as well as other sections on fundamental analysis, intraday and long term swing trading.

Useful Links:

All my technical analysis is done using the TradingView platform. You can get access via the link below.

https://tradingview.go2cloud.org/SH3bP

My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.

https://www.icmarkets.com/?camp=38537

FTMO Trader Funding Programme.

https://ftmo.com/?affiliates=335

Thanks for reading and please don’t forget to LIKE, SHARE and FOLLOW my blog to stay up to date with the latest market analysis and trading education posts.

DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.

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