Intraday trading is difficult because there is too much noise on the shorter time frame. However, even if you are a swing trader, you can enter your trades by using intraday techniques.
Find intraday levels by using pivot indicator in your charts. Next, scan these stocks with Amibroker or other tools. Use pivot only on the daily charts to search the stocks.
Although I trade in the higher time-frame, I look for good entry in the lower time frame.
Prices can move down within the day and move up at the close.
In this guide, we will break down the strategies I found over the years.
How to find an intraday level with Pivot Points?
First thing first, compute the pivot point of the previous day.
Here’s how you compute the Pivot point.
S3 = L - 2*(H - P); S2 = P - (R1 - S1); S1 = (P * 2) - H; P = (H + L + C) / 3; R1 = (P * 2) - L; R2 = P + (R1 - S1); R3 = H + 2*(P - L);
Before the trading day opens, I have already computed the pivot point.
Also, I use it as a level to decide the direction of the trend during the day.
Some swing traders use the weekly pivot point to find the significant level of the week.
But we are talking about intraday here, so we are going to use daily pivot.
As a caveat, I don’t really use this strategy anymore because I am a position trader. I work from 8:00 AM up to 5:00 PM, and I don’t have time to watch the stocks.
All my Amibroker scans have focused only on the daily charts. I have observed that intraday trading is not for me because, to be honest, day trading is difficult.
You have to stay on the screen to monitor your trades, and you have to exit before the close of the day.
For me, I don’t day trade because I believe trading stocks is my way to financial freedom.
I don’t want to watch my stock every day.
Don’t get me wrong, if you want to day trade, Pivot trading is a good strategy.
Price Above and below Pivot
Traders have considered the Pivot level their point of reference, and have a bullish bias if the price is above it.
However, because of too much noise in the lower time frame, some traders are often whipsawed.
Whipsawed means you buy above the pivot and the price suddenly moved below the pivot point.
S1 and S2 -Box method
Some traders buy at the break of S1 and sell at S2. You can set the stop loss between the Pivot and S1. Also, you need to have high volatility to be successful with this strategy.
I’ve been successful several times with this method, but I can’t stay glued to the screen. That’s why I moved to longer term trading.
R1 and RS
Using R1 and R2 for selling stocks is also profitable. I have tried this strategy in the past for shorting stocks. It is just the opposite of S1 and S2 above.
Box strategy has been my tool to reduce stress in trading. I even use it in my long term trading.
Even Darvas had used the box strategy. Using other technical indicators had been a loser for me. Why?
Do you think large institutions will buy stocks that are based on moving average indicator? I doubt it.
They care about liquidity, and they also know where the retail traders placed their trades.
First Hour Candle Break-Out
Some traders use the first-hour candle as a level of support and resistance.
For example, traders buy the stock when the price breaks above the high, and sell it at the cross below the low for the first-hour candle.
It is a good strategy but you have to get the win-loss ratio by backtesting it with tools like Amibroker.
The win rate is important to set your risk-reward ratio. The complete trading system must have a plan for entry, exit, and risk.
20% Breakout Level
Some traders use the 20% breakout from the open of the day to catch possible ceiling plays. When this breakout happens, some stocks can rise up to 40%.
Based on experience, I buy above 20% and wait for the price to reach 30%. If it doesn’t reach that level in the morning, I sell it before noon.
Otherwise, I will hold the stock with a trailing stop until 30 minutes before the close of the trading day.
All things considered, I found that trading these levels can be profitable. Provided, you backtest it properly to create your plan.