In the above video I will show you a live example of a simple day trading strategy that I like to trade, called “The Opening Gap”. The video was recorded by myself today at the market open (9:30 EST or 14:30 GMT).
I don’t claim to have invented this strategy. In fact, many day traders like myself have been using this high probability strategy for years and making a nice weekly income from it.
Here is how the strategy is played:
1) Set up a 5-minute (or 2-minute) Chart of the Dow Jones E-mini Futures (or “Wall Street Futures”)
2) The timeframe for this trade is from 9:30 EST to 16:15 EST
3) The chart will not necessarily show you the Opening Gap, which essentially is the period (or “gap”) from yesterday’s closing price on the Dow at 16:15 EST to today’s open at 9:30 EST. Tip: What you can do is draw a horizontal line at yesterday’s close and when today’s market opens, just trade in the direction towards that horizontal line. This is the same as “filling the gap”.
4) You trade in the direction to fill the gap (or towards the horizontal line – as explained above)
5) If the open on the Dow today is lower than yesterday’s close, then we go long (buy) and if open above yesterday’s close then we go short (sell short).
6) The gap on the Dow must be a minimum of 20 points and no more than 50 points
7) Enter with a market order at the market open i.e. 9:30 EST
8) Use a stop-loss of equal the size of the gap or, if you prefer, twice the gap size (the reason why a 1:1 or an inverse risk-reward is used here is because this is a high probability strategy and I want to allow the trade to play out)
9) The target is yesterday’s close.
10) If the gap does not fill by just before 16:15 EST (the close), then exit the market for either a small gain or loss. If your stop gets hit I do not suggest re-entering the market – for me the gap trade is over for the day.
By the way, watch my new video on how you should trade the gap strategy for 2015. Plus I’ll reveal the best and worst days for trading the gap. For details, click here.
Here are some chart examples:
See the video above for a live example.
The Video’s Best Bits:
If you cannot be bothered to watch the whole video (which I recommend you should), then here are the main bits:
1) The Opening Bell and placing the trade: Scroll to 0:48 of video
2) Placing an alert to notify you of when the target is hit: Scroll to 1:40 of video
3) How the trade ended: Scroll to 4:53 of video
By the way, in my free trading alerts (3 times a week), you will also see other trading strategies that I use to day trade the markets. Feel free to try it.