If you are finding the current long-term tape is driving you crazy, here is a simple solution that works like a charm for day trading.
This is not a full trading plan but it come close. We are using the SPY ETF as an example but you can apply the trading strategy to any stock.
The concept is to use the 60 minute charts for your day trading trend and the open price indicator as your filter.
60 Minute Charts and Open Price Indicator
60 Minute Charts: How to Apply the Day Trading Strategy
The Open Price Indicator
Most traders will identify a stock’s strength, by net change, or change form the previous close.
This is fine if you are swing trading, but today, we are purely using the 60 minute charts as the main trend indicator.
Once we have identified a trend (The current hour is a green or red candlestick) we then look for confirmation from the last price from the open price.
If we get agreement, we then drop down to a shorter time frame, usually the five or fifteen minute charts, to identify an entry/
Since we are trading by the hour, flag patterns can take too long to develop.
This means looking for:
- An inside candlestick breakout.
- In the direction of the indicators just described.
This the best bet to find a clean entry signal.
This strategy calls for you to “reset” your trend every hour and reevaluate if it is still in sync with the change from the open.
When they diverge, you simply let the entry signals go, and wait for confirmation.
How to Apply the Strategy to Swing Trading
Swing traders can use the same filters, but need to change the time frames to monthly candlesticks (for change from the open) and weekly candlesticks to reset in place of the current 60 minute charts.
If you want, you could also create a trading game plan using a simple moving average to get additional confirmation.
