Advanced
Day Trading with the Camarilla {b} Equation
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When
to jump in - opening a trade
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When you
reach a professional day trading level, you will realise that
on approximately 75% of days, an interesting thing will happen.
Price, instead of bouncing off the upper or lower band defined
by the 'flat channel', will break thru. There is nothing mystical
about this; market prices move during the day because buyers
and sellers have trading disagreements about price, and this
can obviously be used as the basis of a trading strategy.
They resolve these differences by 'testing' each other's limits;
in other words, buyers try to bid the price up BEYOND the
'Go Long' level, and sellers try to short it down BELOW the
'Go Short' level. If one side is much stronger than the other,
one or other of the boundaries will be broken significantly,
and you see the market start to trend that way strongly. And
a strong trend gives the day trader something to trade against.
The fascinating thing about the Camarilla {b} Equation 'Go
Long' and 'Go Short' day trading levels is that they highlight
the prices at which traders and players with longer trading
time frames begin to get interested. Large funds, for example,
may ignore the usual intraday meanderings; they have no interest
in trading every half a point move; but suddenly become concerned
if price drops thru the 'Go Short' level. They will then also
join the fray, trying to protect their own positions, and
a sudden strong directional move develops. It is these sudden
sharp thrusts that the day trader wants to ride on. These
are the '30 foot breakers' that will give us the really cool
surf ride up to the day trading beach.
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| This also,
of course, gives us a fairly low risk entry point, whether the
market is rising or falling, and important consideration in
any day trading strategy. Breakouts thru these go long / short
levels are usually strongly directional, meaning that we can
trade them with relatively small stop losses as there is a LOT
of cash behind them. Small stop losses usually equate to low
risk. One note - if the distance between the entry point and
the profit target suggestion is less than the distance between
the entry point and associated stop loss, the trade has a poor
'risk / reward' ratio. You may want to reconsider day trading
on a day like that, as maintaining a positive risk / reward
ratio will be a great help to you in the quest for consistent
day trading profits. |
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