Day trading breakout strategy in simple steps

Day trading breakout strategy in simple steps

The advance-decline data is one of the most important data points that we should track as an intraday trader. This is a decision-making data.

The advance-decline data is one of the most important data points that we should track as an intraday trader. This is a decision-making data.

The ratio between these two indicates whether the market is in a bullish or bearish trend. Trading is much easier when broader market performs.

Trading is much easier and more profitable with advance decline data which is available on the NSE website for free. When advance decline ratio rises stocks trend higher.

Using this strategy, we pickup trades in which the odds of success is much higher. When advance-decline ratio is below 0.6 one should avoid trading on the long side. Best intraday trading comes out when ratio is between 1.5 and 2.5.

In technical analysis trading range is extremely the easiest strategy to execute. Usually the range in which a stock trades is horizontal or at an angle and if the price moves above this particular range at the upside or down-side then you take a long or short trade.

Mark the range on 5 minute or 15-minute chart.

The next step in the strategy is timing and context of breakout. The breakout happens between 9:15 to 11:00 or 2:00 p.m. to 3:00 p.m.

The morning slot would be better because you have very little trading time to take decision in the latter part of the day. With little time left sometimes we may have to exit with limited profits.

In morning session price has time on its side. If you are trading in the afternoon session one needs to be nimble and take profits aggressively. In the morning session it is much easier to plan out your trade as you can position size better.

In the afternoon session because of the limited time disposal at hand it is not possible to add positions to your size.

In the context of breakout when the price makes a break-out and reaches a previous resistance level it is bound to bounce from that place. If momentum is strong and price is moving upward then we can initiate a trade.

Another trading strategy is to take a trade based on the short-term relative strength trend. As a thumb rule if the relative strength trend is strong one would go long and if it is weak one would go for a short sell.

This is one indicator which ensures that we are trading on the right side of the market. Finally, for intraday one needs to analyse price with respect to volume.

If there is a breakout in price simultaneously the volume needs to expand. Sometimes the price moves up but volumes do not move which indicates that it is a false breakout. Thus, strategies become important in trading.

(The author is a homemaker who dabbles in stock market investments in free time)

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