FTSE and DOW Day Trading Strategy Using Channels, Trend Lines and Moving Averages

FTSE and DOW Day Trading Strategy Using Channels, Trend Lines and Moving Averages

Here is a brief example of a DOW day trade I took tonight and it should give you a better understanding of the simple way I approach day trading.

The way I trade and the strategies I use tend to relate to market volumes and volatility and because of this some of what I do is based around experience of what will and wont work based on current Market characteristics.

As with most day trading strategies, not every set-up produces the results we are looking for and my first DOW day trade today did take a loss, but the subsequent one detailed here worked a charm and it was just a shame the session only had 15 minutes left otherwise it may have produced far greater gains.

In this example DOW had fallen out of it’s consolidating range and straight through a falling trend line. There are occasions where I’d buy the touch of such a trend line but probability of a successful trade diminishes when the intraday trend is down and the channel is also sloping down. In these situations you want to find a way of joining the downwards trend as opposed to going against it (which I’d done in the earlier loss making trade).

This chart shows the break of that trend line and a subsequent retrace back to test it:

With combined trend line resistance and potential resistance from the 20 MA I entered short at 12,493

The following chart shows the result of that trade as I covered the position on the closing bell for a profit of 24 pips and no draw down whatsoever:

Moving on to another strategy I sometimes use, in this case during the FTSE morning session and again, only when conditions are right. For example, this strategy tends to work better on low volume trending sessions and I use it on the 1 minute chart.

In this particular case I bought the first pullback to the  1 minute 200 MA. After a struggle the trade failed but generally in an up trending low volume day the first pull back to the 1 minute 200 MA offers highest probability of success.

The 2nd touch of the 200 MA was from below but there was no confirmation on any time frame that selling this touch was likely to pay off, so it was time to stay flat. Eventually price broke back above the 200 MA and I bought the subsequent retest shown in the 3rd red circle from the left.

As the trend progressed I added to my position on each subsequent touch, and then as the trend became more parabolic (if you can call it that!) along with increasing volume I moved up the MA ladder onto buying the 100 MA touches. As this pattern continues the 50MA and eventually the 20 MA start to offer primary support/scaling in opportunities until such a time where price either detaches itself completely from the MA’s, or, MACD starts showing negative divergence after which I’ll start to scale out of the accumulated positions.

It’s worth noting that had price fallen back below the 200 MA at the point of the 3rd red circle we could assume that the day was likely to be a choppy trend-less day in which case this strategy would have been dropped in favour of something more suitable.

There is a lot of trial and error involved in both of the trading set ups I’ve detailed here. I have my own ways of dealing with different kinds of intraday moves and I use my own day trading system to back up any potential intraday trade and sometimes I just rely on pattern recognition from experience. Ultimately it is the responsibility of the trader to find a time frame and a strategy that works for them, but nonetheless I hope you enjoyed the insight into a couple of the methods I use to day trade Indices.

1 Comment
  • gaff rigged
    Posted at 04:41h, 18 January

    really, really useful, thanks