To maintain your success at a constant pace there are certain levels that you must pay heed in a day-trading session, no matter what your strategy is. Have a look on these levels described below and utilise them fully to have a successful market strategy!
Yesterday’s Low and High
Most of the day traders strategise their trading on the basis of low and high of a day.
Price sometimes starts to fall while approaching the previous day’s high which gives the day traders the option to move out of a long trade and safeguard the gain.
You can use these levels easily in your chart. In the beginning of the ongoing trading session or at the end of the last day just consider the last day and from the high of the session, draw a horizontal line and the other one at its low.
Opening range is the difference of the low and high price that follows the opening of the market. Usually it is the initial thirty minutes’ price of trading for the day traders.
You will be able to draw these only when the opening range is complete. The moment it is complete, you need to draw one horizontal line at the low and one at the high of this range.
No matter how the opening range is, wide or narrow, this technique will always work brilliantly. Once broken, stronger resistant or support level is provided by the narrow range and the wide range holds the price which suit reversals off the ranges better.
This technique is one of the most effective tools that hardly takes a second or two every morning to draw the simple lines in the chart.
High and Low of the Current Day
We cannot know the actual low or high of the current day till it gets over, but we can still use this effectively in the trading session.
The lowest and the highest point marked in a trading session until the prevailing time, i.e. the current time is the ‘current high or low of the day’. However, there is still a scope that the price may further go lower or higher.
You get to know the actual effectiveness of this technique consider the market that you expect in that session.
A strong trend of the broader market implies the bullish trend or the bearish will be easily broken. You may concentrate on breakouts in the trend direction.
A ranging broader market implies the bullish and the bearish trend will be on hold and more genuine. But BEWARE! there is one thing you need to be cautious of, i.e. check for atleast one half of the Average Daily Range placed first.
Average Daily Range (ADR)
There is nothing technical but just the simple averages. Find out the average daily range (ADR) of any market for, say the last month, and you will get the range which is most frequent in the short period.
But this is no magic but just the law of averages which is likely to give you imperfect results too! There might be a day with a tiny range and the other one with dynamic ones which drags the whole range off the likely trend! You will see that this range is daily average estimation worked out is on the basis of the last month trends.
Its methodology is very simple, no rocket science! Take help of numerous free tools available to find out ADR over the previous month. Now add one half of the ADR to the opening price to get the upper boundary, i.e. the point where the price may end up on average. Subtract the other half from the opening price to get the lower boundary where you can expect the price to reach the average.
Also, notice that the most of the resistance and support lines are “price areas” than the ‘lines’ in reality. So you need to be cautious when using this approach, preferably, set this areas as the temporary price targets to be achieved before you lose the momentum for the day.
High and Low of the Previous Week
The weekly low and high of the last week is often a strong resistance and support level for the entire prevailing week. The significance of these levels is that they are to be placed in the chart just once and serve you for the rest of the week.
The related range of the last week is likely to effect the expected behaviour of these levels.
However, in case of narrow weekly range see the levels breakout, acting as support or resistance as well following the breakout.
And if the last week’s range is wide, anticipating reversals from the levels is recommended as it will hold the price.
As you know resistance and support levels are uncertain, but I have find these key levels the most effective method to turn odds into favourable. Good luck!