No amount of math, TA or fundamental analysis is sufficient in the world of the market. No matter how much effort, time and energy you put into analyzing charts, doing calculations and reading SEC filings, you are bound to stop out. And unfortunately, if you are a day trader, this can compound pretty quickly in an off-week where the market decides to behave…… let’s say.. interestingly.
When I day trade, I do make best efforts to hold and trail positions to high probability targets. Sometimes this works fantastically, other times it backfires horrendously. As such, I have a few sure and true methods I have and use to offset those times where my plan and targets backfire on me when I am day trading.
I am going to show you 2 of my tried and true emergency strategies. I term them “Uh Oh” strategies because I only ever resort to them when I am in trouble (really red on the day). Before we get into them, I need to set the stage of when they should be used and what they are intended to do. So let’s go over some basic rules on these strategies:
1. They are intended ONLY for choppy days. At least for me, most of my stop outs come from choppy days, so that is why I have them. Using them on trend days won’t work.
2. These can be pretty high risk if not managed appropriately. You need to be careful with your position size and set your stop out VERY tight using these strategies.
3. These aren’t intended to be a “let’s get cute and trail” strategy. The purpose of this strategy is to play only the price action, ignore the bigger picture and provide a quick 1 to 5 minute scalp with a relatively hefty size to offset losses. While you should always let your winners run, if you are using this as a last ditch effort to salvage your day, please don’t get cute with it.
4. If you are using these as a last ditch effort on the day, before resorting to it, you need to step away and consider whether it is really worth it. Overtrading can be even more harmful to your psychology and can block you, despite having the best entries. Always be mindful of how you are feeling and how your feelings and emotions are translating to your trading. As such, I generally will resort to these strategies if I have 2 failed day trades and I keep it at one trade using one of these. If I also have a stop out using this, I just call it quits on the day period.
Alright, on with the strategies!
Strategy: The EMA 21 with Standard Deviation Strategy
Basic Info:
Indicator: EMA 21 that has the EMA 21 standard deviation bands (you can use my ultimate customizable EMA indicator to achieve this, or any other EMA indicator you have that permits the SD bands to be added, I will link my indicator below).
Chart Timeframe: 1 or 5 minute. I use the 1 minute but the 5 minute works actually better. I will show both below.
When to use: NEVER use this strategy in the first 30 minutes of the trading day or the last 30 minutes of the trading day. The volatility makes this strategy pretty unreliable.
Procedure:
The image above shows the ticker
SPY
on the 1 minute timeframe with the EMA 21 and 21 standard deviation bands overlayed. In this example, I am using my own indicator available here.
Step 1: Identify the short term trend on the 1 minute timeframe using Tradingview’s trendline tools (see the example below):
You can confirm the trend by simply looking for higher highs and higher lows:
Step 2: Go with the trend. If its in a short term uptrend, you are looking for longs, if it’s a short term downtrend, you are looking for shorts. What you are waiting for is a pullback below the opposing standard deviation band. Here is the example using our uptrend:
Above is an example of a long entry. Once you have established you are in a short term uptrend, you wait for it to touch and break into the lower SD band on the EMA indicator, then you long it to the top of the bands, as shown in the image above. The candle should start pushing back below the EMA band to confirm that it has not “broken out”. Here are examples of breakouts vs continuation signals:
And for short entries, you do the inverse. See the example below:
If you want to use the 5 minute, here is an example of 5 minute entries and exits, following the same rules:
The green represents entries and red exits.
If you are doing this strategy on the 5 minute, the biggest difference is that you can pay less attention to whether you are in a short term uptrend or downtrend. The moves tend to be better on the 5 minute, the only downside is by using the 5 minute you are extending the duration of the trade from 1 to 5 minutes to an average of 20 to 30 minutes.
Strategy 2: Previous Hour High/Low Average
Basic Info:
Indicator: You need an indicator that can display the previous hourly high and low average. My baseline indicator can achieve this if you don’t already have one, available here.
Optional indicator: EMA 21
Chart Timeframe: Can be 1 through 5, you are using the last hour so timeframe is not all that important.
When to use: ONLY works on choppy days. You will be able to tell if the day is truly choppy using the previous hour average. Choppy days have alternating high and low averages (see the chart below):
In the chart above, you can see that each average alternates between being higher, then lower, then higher again. This is a confirmation of a choppy day and that this strategy is appropriate. Inversely, trend days appear as a “staircase” pattern on the averages (see below):
Step 1: Confirm it is a choppy day. See the example charts above. Once you have confirmed it is indeed a choppy day, then go on to step 2.
Step 2: Identify your setup. In general, on a choppy day, if you open below the previous 1 hour average, the stock will retrace this average. You can use the ema 21 or ema 9/21 to plan your entry on a crossover, or just gauge the PA itself (see below for example):
You can see in each instance the stock retraced its previous average. This strategy is amazing but you have to be EXTREMELY careful that it is in fact a choppy day and not a trend day. Some days may start off choppy and then turn into a trend (see image below):
This is why it can also be helpful to combine the EMA 21 with this strategy.
Conclusion:
And that is it! Those are my 2 "Uh Oh" strategies.
Hopefully you found this informative and helpful. Let me know your questions and comments below!
Safe trades everyone!
When I day trade, I do make best efforts to hold and trail positions to high probability targets. Sometimes this works fantastically, other times it backfires horrendously. As such, I have a few sure and true methods I have and use to offset those times where my plan and targets backfire on me when I am day trading.
I am going to show you 2 of my tried and true emergency strategies. I term them “Uh Oh” strategies because I only ever resort to them when I am in trouble (really red on the day). Before we get into them, I need to set the stage of when they should be used and what they are intended to do. So let’s go over some basic rules on these strategies:
1. They are intended ONLY for choppy days. At least for me, most of my stop outs come from choppy days, so that is why I have them. Using them on trend days won’t work.
2. These can be pretty high risk if not managed appropriately. You need to be careful with your position size and set your stop out VERY tight using these strategies.
3. These aren’t intended to be a “let’s get cute and trail” strategy. The purpose of this strategy is to play only the price action, ignore the bigger picture and provide a quick 1 to 5 minute scalp with a relatively hefty size to offset losses. While you should always let your winners run, if you are using this as a last ditch effort to salvage your day, please don’t get cute with it.
4. If you are using these as a last ditch effort on the day, before resorting to it, you need to step away and consider whether it is really worth it. Overtrading can be even more harmful to your psychology and can block you, despite having the best entries. Always be mindful of how you are feeling and how your feelings and emotions are translating to your trading. As such, I generally will resort to these strategies if I have 2 failed day trades and I keep it at one trade using one of these. If I also have a stop out using this, I just call it quits on the day period.
Alright, on with the strategies!
Strategy: The EMA 21 with Standard Deviation Strategy
Basic Info:
Indicator: EMA 21 that has the EMA 21 standard deviation bands (you can use my ultimate customizable EMA indicator to achieve this, or any other EMA indicator you have that permits the SD bands to be added, I will link my indicator below).
Chart Timeframe: 1 or 5 minute. I use the 1 minute but the 5 minute works actually better. I will show both below.
When to use: NEVER use this strategy in the first 30 minutes of the trading day or the last 30 minutes of the trading day. The volatility makes this strategy pretty unreliable.
Procedure:
The image above shows the ticker
SPY
on the 1 minute timeframe with the EMA 21 and 21 standard deviation bands overlayed. In this example, I am using my own indicator available here. Step 1: Identify the short term trend on the 1 minute timeframe using Tradingview’s trendline tools (see the example below):
You can confirm the trend by simply looking for higher highs and higher lows:
Step 2: Go with the trend. If its in a short term uptrend, you are looking for longs, if it’s a short term downtrend, you are looking for shorts. What you are waiting for is a pullback below the opposing standard deviation band. Here is the example using our uptrend:
Above is an example of a long entry. Once you have established you are in a short term uptrend, you wait for it to touch and break into the lower SD band on the EMA indicator, then you long it to the top of the bands, as shown in the image above. The candle should start pushing back below the EMA band to confirm that it has not “broken out”. Here are examples of breakouts vs continuation signals:
And for short entries, you do the inverse. See the example below:
If you want to use the 5 minute, here is an example of 5 minute entries and exits, following the same rules:
The green represents entries and red exits.
If you are doing this strategy on the 5 minute, the biggest difference is that you can pay less attention to whether you are in a short term uptrend or downtrend. The moves tend to be better on the 5 minute, the only downside is by using the 5 minute you are extending the duration of the trade from 1 to 5 minutes to an average of 20 to 30 minutes.
Strategy 2: Previous Hour High/Low Average
Basic Info:
Indicator: You need an indicator that can display the previous hourly high and low average. My baseline indicator can achieve this if you don’t already have one, available here.
Optional indicator: EMA 21
Chart Timeframe: Can be 1 through 5, you are using the last hour so timeframe is not all that important.
When to use: ONLY works on choppy days. You will be able to tell if the day is truly choppy using the previous hour average. Choppy days have alternating high and low averages (see the chart below):
In the chart above, you can see that each average alternates between being higher, then lower, then higher again. This is a confirmation of a choppy day and that this strategy is appropriate. Inversely, trend days appear as a “staircase” pattern on the averages (see below):
Step 1: Confirm it is a choppy day. See the example charts above. Once you have confirmed it is indeed a choppy day, then go on to step 2.
Step 2: Identify your setup. In general, on a choppy day, if you open below the previous 1 hour average, the stock will retrace this average. You can use the ema 21 or ema 9/21 to plan your entry on a crossover, or just gauge the PA itself (see below for example):
You can see in each instance the stock retraced its previous average. This strategy is amazing but you have to be EXTREMELY careful that it is in fact a choppy day and not a trend day. Some days may start off choppy and then turn into a trend (see image below):
This is why it can also be helpful to combine the EMA 21 with this strategy.
Conclusion:
And that is it! Those are my 2 "Uh Oh" strategies.
Hopefully you found this informative and helpful. Let me know your questions and comments below!
Safe trades everyone!
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