3 – Congestion Rules:
- Buy daily lows or sell daily highs.
- Frequently a better entry point is achieved by buying (or selling) on 0.5-1.0 spread distance from the point of close when the close is at the extremes of the daily range.
- Buy/sell at previous daily highs, lows or closes.
- Take profits equal to one daily spread or at pertinent pivot points (previous highs, lows and closes).
Day Trading Technique
When a clearly defined trading zone has been formed, one may frequently trade to advantage by:
- buying daily lows when below the 50% point and taking profits at daily highs.
- selling daily highs when above the 50% point and taking profits at daily lows.
In a Running Market
- Bull Market – Buy daily lows preferably on a 1-2 day reaction.
- Bear Market – Sell daily highs.
A variation to the above is to buy/sell channel extremes and cover at mid-range.
Valid pivot point is one based on a 2-day reversal. A one day reversal is subject to question.
When market makes new high, one of three things will happen:
1 – Continued upmove
2 – Sideways pattern
3 – Reaction
At new highs, a selling force is present. This selling force may be sufficient to terminate the move or merely correct an overbought condition. Action at this point will generally reveal whether or not move is terminal.