Day trading strategies for 2022
BY Chris Andreou
|January 3, 2022In this article, I will share with you two different but very useful day trading strategies that can be applied when taking advantage of the trade ideas you either have yourself or you learn to find by using our analysis. One of the strategies triggers trades when an hourly candle closes above a key resistance level and the other uses minor support levels at a 2-minute chart but in the context of a larger timeframe breakout. I will illustrate these strategies using a recent real-life example of the many constantly successful market analyses I share on our analysis page. This pound to dollar forecast was an instant success and armed with this knowledge you can choose the right kind of day trading strategy (or a swing trading strategy) in the future. Because the same patterns will repeat again and again in the markets you can learn from past examples, like the ones I use in this article. By combining the strategies you learn in this article and our constantly successful analysis (available here), you can find more trading success in 2022.
Do you ever look back at the charts and say to yourself: I wish I would have bought that breakout or that reversal! Often traders get these should’ve, could’ve, would’ve thoughts when the price has already moved strongly and, with the benefit of hindsight, they recognise the superb spots to enter a long trade. And yes, we all are guilty of this! It’s easy to trade ideas in past data.
Distorted reality
But did you know that the full twenty-twenty hindsight vision actually distorts reality? You might wonder why would the so-called perfect hindsight vision do that; wouldn’t exactly the opposite be true? The problem lies with the way our brain deals with the reality it observes. We tend to cherry-pick the best moments for buying or selling when we look at the price history (charts) and then quite naively believe that we undoubtedly would have picked exactly those moments when timing our trades in real-time! We believe this self-deception even if we know that at the time of those great trade ideas, we were fast asleep or watching a football game! Instead of regretting past mistakes, it’s better to a) learn day trading strategies that work and b) learn to recognise the opportunities in real-time. If this is what you want, then this article is for you!
Hindsight bias
This human tendency is actually called an “I knew it all along” phenomenon, or just simply a hindsight bias. Oh, the billions of dollars we’ve collectively “made” with these past tense trade ideas! When we are looking at the charts with our ‘hindsight-spectacles’ on we just ignore all the other times when our ideas would not have worked out. Quite often it’s painful to think of all those missed opportunities, but if it helps at all: We’ve all done that.
Proposal
Now, instead of constantly looking at past price action and torturing yourself with the should’ve, could’ve and would’ve mentality, you actually have an alternative. Let me make a proposal for you! I invite you to test our trading platform for free (on demo mode and no strings attached!) and I will provide you with timely analysis so that you are alerted to these great trading opportunities either ahead of time or right at the time of taking action!
I will also help you by teaching you day trading strategies you can apply in different market conditions. Not a bad deal, considering you will get it for free! Take action and get started right now. Here you can register for a demo account and here you can register for my free high-quality market analysis. As a TIOmarkets client, you will have one of the best trading environments (tight spreads, no per-trade fees) together with great market analysis and trading strategies to apply! Not bad, for a free deal, right?
Solidifying your trading knowledge
In the spirit of full transparency, there will be occasions when I get it wrong (like all the other traders) but with good risk management, it’s not a problem. Trading is a game of probabilities and losing trades are an integral part of the package – just the cost of running the business. If there were no losing trades we could forget about learning day trading strategies or any other kind of strategies for that matter.
Join the webinars I will teach you day trading strategies and show you how to manage the risks in such a way that no single trade is going to make too big of a dent in your account. Once you learn more and solidify the new knowledge you will be able to turn the knowledge into a serious trading skillset. With it, you should be able to get ahead in trading currencies, commodities or stock indices.
In these live trading strategy sessions, I will show you what kind of strategies you might want to use when taking advantage of my market analysis. No strategy alone is going to make you successful in trading so you need the right kind of market to trade the strategy in – and this is what you can learn by following my analysis.
Take your trading to next level
So, are you ready to take your trading to next level? I will provide you with trade ideas and day trading strategies that will make your learning curve shorter. Okay, I have promised to help you but if you are new and haven’t been reading my market commentary and analysis you might ask whether you actually should trust that I know my business. This is a fair question!
I’m a firm believer in the axiom that words are cheap. Anyone can brag about anything but if there’s no data to support the claims they don’t mean much. This is why we keep a public record of all of the analysis and market commentary online. Anyone can go to our analysis archive (here) and verify the quality of my work. If you like what you see, you can register to get the analysis delivered to you via email. It’s free so take a moment and subscribe to it!
No cherry-picking
It’s quite common to see educators on YouTube refer to past examples that are cherry-picked after the fact. That’s quite easy when they use the 20/20 hindsight! Remember, what we discussed about picking trade ideas from the past data with a distorted vision? Try doing the same with the live data and all the distractions of your daily life around you!
So, let’s use an actual real-life trade idea that was published (here) and then tracked in the following days (here and here). While we are not for regulatory reasons allowed to provide investment advice we can teach trading strategies and highlight what technical and fundamental factors are relevant to monitor to find out whether a market is more likely to move higher or lower. The trading decision itself is always the trader’s responsibility but we provide the tools that help you in making the decision: Commentary & analysis and the alternative strategies to employ at your own discretion. All the content we provide is educational and there to help your personal growth as a trader.
“FX weather forecast”
Any market forecasts I make are like weather forecasts; there’s no guarantee that the market will move the way I forecast just as it sometimes rains even though the weather forecast indicated that there should be sunshine. To be precise, you are not guaranteed a positive outcome (make money) by reading my analysis. What I can promise though is that you will learn a lot by reading analysis, joining the webinars and studying the markets diligently. It’s your personal growth as a trader that matters, not the immediate financial outcome! Only by growing and getting better, you will attain constant success in trading.
350 pips!
Let’s take a look at a recent pound to dollar forecast I made recently. Following my analysis pound rallied strongly against the dollar providing great trading opportunities to both intraday traders and swing traders. At the time of writing this, the rally that followed has taken the pound to dollar (673,000 /74) rate all the way up to 1.3550, i.e., about 300 pips from the first breakout signals a few days earlier. At 10 dollars per pip (with 1 GBPUSD contract) the trading opportunity was pretty significant in dollar terms too.
I shared earlier links to some of the analysis report so you can see that we are not using hind-sight and make these up afterwards but actually publish these trade ideas in real-time to help our readers to navigate the markets better. Next, I will show you what strategies could be applied when taking advantage of our analysis. Let’s study how the market behaved after we published this GPBUSD analysis and what kind of day trading strategies could be applied in a rising market.
The above chart shows the GBPUSD pair at the time of our pound to dollar forecast. Note how the pound retraced towards recent lows and then started to attract buyers again. This was evidenced by the pair breaking out of a bearish trend channel. Our fundamental analysis at the time pointed to GBPUSD being a fundamentally strong currency as the Bank of England was the only central bank among the G7 countries that had raised the interest rates after the Covid-19 pandemic started.
Our pound to dollar forecast was therefore bullish. Traders sometimes make the comparison fundamental vs. technical analysis and ask which one they should apply. In my opinion, we should use both. While fundamental analysis provides us with the reason to be bullish or bearish, technical analysis helps us with the timing of our trades and there makes risk management easier.
The next day our forecast started to work out and the GBPUSD began to move higher in a bullish trend channel (see the report here). As the above 2h chart shows Cable was trading fairly close to the lower end of the price channel and the Stochastics oscillator (5.3.3) was almost oversold. In an uptrend this is a good setup for long trades; it didn’t take long for the market to take off and rally higher!
Okay, this should provide enough background for this pound to dollar forecast. Now, let’s go and look at the day trading strategies that could be applied.
GBPUSD breakout at 1.3247
Day trading strategy #1: Price breaking above a recent resistance
One of the strategies that worked well was to buy the breakout above the most recent swing high at 1.3247. The first close in the 1h chart above the 1.3247. There was a retracement after an initial rally but from the 1h close (at 1.3247) the market retraced only 17 pips or 0.13%. Therefore, a 30 pip stop was more than enough.
GBPUSD breakout at 1.3264
The next time there was an opportunity to buy a breakout the market closed at 1.3264. This time the move the breakout traders had to endure was 24 pips or 0.18%. The contra-trend correction ended at the previous breakout point. The other factor worth noticing here apart from the higher highs is the bullish moving average setup. The red (20-period) SMA was pointing higher and trading above the blue (50-period) SMA while the price was most of the time trading above the faster SMA. I have left diagonal trend lines and price channels out of this chart to highlight the elements important to the break out strategy.
GBPUSD breakout at 1.3264
The third opportunity to get long on this market came on December 22nd at 1.3285. This time there was no retracement after the breakout. The market was just so strong! GBPUSD finished the day approximately 50 pips higher. Bearing in mind that the 100-day average range of GBPUSD at the time was 85 pips, a 50 pip catch on one day is an excellent result. That’s almost 60% of the average daily range.
The strength of the breakout made it easy for the longs to stay in the trade but when we are trading these setups we need to also prepare for those times when the market isn’t so easy to trade. It can move significantly against our position which means that a) we need to protect our account by using a stop-loss order but also b) that there’s a risk of the market stopping us out before the price really takes off!
Don’t be a weak holder!
In other words, we need staying power. If you are not familiar with the term, let me explain. There are always two groups of traders, those that are weak holders and those that are able to hold on to their trades. The latter are so-called strong holders. So, how do we get to belong to the latter group? While there are times when we are kicked out by the rodeo horse that the market sometimes is, we can improve the odds by not trading too big. This will reduce the psychological stress and makes us stronger traders. Another important rule is not to place the stop loss order too close. A stop too close just makes it more likely that we are stopped out of the trade.
GBPUSD scalping trade entry
Day trading strategy #2: Buying minor supports after a breakout
There are obviously several different day trading strategies. In this article, we can cover two types of strategies. While strategy number one relied on a 1-hour candle closing above a resistance level to trigger a trade, strategy #2 uses minor timeframe charts for the same purpose. This approach can provide trade opportunities for both scalpers and intraday swing traders.
What is a scalping trade?
Before moving on, let me clarify that in my books scalping trades are trades that target anything between 5 to 20 pips several times per day. Such a strategy can, however, occasionally make more if more is available. A scalping strategy relies on quick entries and exits at minor support and resistance levels. With intraday swings, I refer to trades that on average make 20 to 50 pips and can occasionally be turned into swing trades that are held overnight if the trader thinks it is justified in the light of price action at the time.
With this day trading strategy, we are interested only in markets that are breaking above a significant price level and therefore are likely to have upside momentum. Therefore, the idea is to buy strength but at a support level.
GBPUSD scalping trade entry
To ensure we are buying when the market is bullish, we look for long trades only above a key resistance level (a level that has been limiting the price advances). This part of the ruleset defines a breakout. Then we move over to a 2-minute chart to identify minor support levels and look to buy long on a bounce from these supports. These bounces are often 5 to 10 pips in size but sometimes yield 20 pips and more. This obviously highlights the need for a reputable broker with tight spreads and fast execution. Take a look at our VIP Black account (here)
Hope this helps you in your trading strategy planning. Day trading strategies include many variations and we look forward to covering more strategies in future articles. Please send us your trading related questions and are more than happy to cover them in our live trading strategy sessions. Send your questions to [email protected] and ask the support team to forward the questions to me. Also: Be sure you don’t forget to register for the next live webinar here: Tiomarkets.com/webinars. I look forward to seeing You there!
Trade Safe,
Janne Muta
Chief Market Analyst
TIOmarkets
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