The following is a clear-cut approach that can be used on the stock market to formulate an intraday trading strategy. The strategy will assume an individual is relatively fluent with being able to make use of basic charting software applications and can determine "uptrend" versus "downtrend" on an hourly chart. The technique is not perfect yet will find a decent volume of good ideas everyday. It should be employed along with other trading strategies for the most benefit. One technique alone is seldom adequate to discover enough opportunities.
To begin with, you will require a charting program that will let you have a look at hourly charts. Put together a listing of 40 to 50 company names which have decent movement on a daily basis. Decent fluctuation means that the high to low range is at least 1 point most of the days. We are going to pull-up an hourly chart along with a daily chart. Then simply insert a 13 time period moving average on the charts. Put each symbol into both of these charts and then have a look at the last 20 to 30 bars. If the slope of the moving average is up on both, the stock is basically in an up-trend. In the event the slope is down on both, the stock is basically in a downtrend.
We want to locate symbols whose price is in a downtrend and then look on the hourly chart. Find ones where the prices are beneath the moving average (does not touch) for the last couple of hourly bars. The main goal is to try to short this stock at or above the moving average. For all stocks which happen to be in an uptrend, we will be looking for price level to continue to be above the moving average for the past few bars. We are looking to purchase stocks that meet this criteria at or below the moving average. Take into account that with this particular intraday trading strategy we will be seeking to enter in the direction of the longer term trend at a location of comparatively reduced risk. This is unlike other intraday trading techniques which may play a break-out of resistance.
This process is using the long-term trend as your guide to get into a position in a location of low relative risk. Make sure to disregard symbols where the trend is not totally obvious. Also avoid using these types of intraday trading strategies when there is a big news event or rumor. Financial news together with rumors can create panic buying or selling which is not what this technique is all about which enables them to very easily produce significant losing trades. Additionally it is crucial that you focus on the entire stock market - Despite the fact that you have 9 or 10 names you happen to be watching which are setup as a short, in the event the stock market is quite strong and pressing higher you need to possess the patience to wait and not enter the order. Overall this approach will generate a decent number of opportunites every day for respectable profits. Keep in mind that just like a great many other intraday trading techniques, this one is not flawless and is not the holy grail. Those with effective stock trading expertise will undoubtedly have the ability to put this method to far better use than someone who has little experience with trading.
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