Improve any intraday trading method with these statistical trading strategies

One method that I love in stock trading (and I use something similar in forex too – it can really be used in any market) is to track the daily range of a stock, as well as the distance that it normally closes from the high. or low. This gives a lot of information. These figures can be calculated using EXCEL simply by tracking the open, high, low and close prices. Manipulating this data in EXCEL can provide a wealth of information that can help a trader identify better entries, stops, and profit targets.

Since we are looking daily averages, this information is commonly used for intraday trading strategies and can be used on its own or more effectively with other indicators, methods or strategies. With this strategy, I will generally watch for volatile stocks (for currency markets, eur / usd or gbp / usd at the beginning of euro or US sessions, for example, but will allow about 30 minutes instead of 15) to make a stop or a minimum. in the first 15 minutes of the day or so. Often times, a high or low made at the beginning of the day is very important (when using this strategy), and the high or low made in those initial 15 minutes gives us a baseline for the rest of the day. Then we look to see what level (either the maximum or the minimum reached in the first 15 minutes or so) is going to be the maximum or minimum for the rest of the day. We do this by observing a lower high or a higher low on the stock as the trade progresses. The methods used to confirm this bottom or top are plentiful, but often just watching a stock plummet in the first 15 minutes, then bounce, then fall again, but not as much as it fell before, and then bounce again is confirmation. that the minimum of the first 15 minutes is probably the minimum of the day.

So now we assume that there is a minimum (or a maximum) for the day. We are also armed with our statistics that tell us what the average daily range is (percentage or movement of the share price). Once we have established that a minimum (or maximum) is likely to exist, we can take positions with profit targets at a price that would be around the area of ​​the average daily range (if we already had the minimum set).

Here’s a super simplified example. A ten dollar stock has a daily range of 10%. Each day this is converted into dollars based on the opening price, so today the price range is expected to be $ 1.00 (10% of the opening price) if the stock opens at $ 10. In the morning , the stock falls to $ 9.75. It bounces, falls back to $ 9.90, and then rises again. We assume that the downside is in place. We buy and place an exit around the end of the average daily movement. The moving average is $ 1 (10% of $ 10). We have already moved $ 0.25 (the open at $ 10 all the way to $ 9.75) so our target is around $ 10.75 (given that our low is already in place, we should assume that all stocks will now be above the low and to the upside) and then adjust to match other support / resistance or other profit targets. So to summarize, in this case our profit target is our assumed low plus the average daily range; $ 9.75 + $ 1.00 in this case = $ 10.75

I also believe that openness is very important. For this reason, I will open using a move back through the opening price as my entry. In the example above, the stock hit a low of $ 9.75, then bounced, and then fell back to $ 9.90. Once the stock rises again through the opening price (in this case $ 10) I will enter a long (or long) position. A stop can be placed below the low (whatever low I prefer, but probably the lowest low of the day) and then I set my profit target.

However, there is a second part of the trade. If prices move around our profit target, we exit the trade. But then what? That’s why we track how far the stock usually closes from its high or low. In this way we get another exchange.

Let’s say the stock closes within 30% of its high (or low) on average. With a daily range of $ 1, if the stock has just peaked and we are heading to close time, we can sell short and place our exit at .30 from the high. To go short (or long if we are dealing with a bounce off the low of the day heading into the close), we watch for reversal signals once we are within or beyond the territory of the average daily range.

This style of trading strategy should provide some ideas on how to improve your own methods, or you can implement this method and refine it based on your own preferences. You can also add standard deviation studies for additional information.

Cory Mitchell, CMT

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