It doesn’t matter if you are Warren Buffett holding positions for decades or Ken Griffith holding them for milliseconds – there are only two ways to trade.
In trading you can either go with the price action – or in traders parlance trade “flow” or go against the price action or “fade” the move.
If you are going to day trade against trend need to know three things – what to trade, when to trade and how much profit to go for.
Here is a set up I trade every day in stock index futures. During the European open (around 4 am) stock futures usually make a session high or session low that is fadable for at least 20 points. And even if the trade doesn’t work the first time it usually resolves in profit on the second or the third attempt.
But trend! Trend is something different altogether. Trend or “flow” trading has a very specific tell that can give very accurate reads on the market.
Here is my proprietary bounce indicator in Flow mode. Notice anything? Flow trades which are bright green tiles on the chart tend to bunch together. Once a flow trade takes shape it tends to be followed by another.
So what does that mean to us as retail traders?
Simple. We only take a flow trade if the prior trade hit the take profit. If the prior trade was a loss we STOP TRADING until flow turn profitable again. Using this stop and go method we avoid the dreaded “churn” and increase our chance of winning trades tremendously.
So here is the surprising takeaway for day trading. To trade counter trend you need to keep trying until you find the turn in the price action. But to trade trend you need stop and go stop and go until you sync yourself up with the trend move in the market.
That’s pretty much the opposite of what most traders do – but now you know!