Have you ever found yourself sitting at your desk after a long day of trading, and asking yourself…what the heck just happened?
I won’t lie about it, that has happened to me quite a bit.
… But that’s how trading goes. Win some and lose some.
Trading is all about finding ways of stacking the odds in your favor to make sure you win more than you lose.
I’ll teach you the secrets of doing just that! Hint: it all starts from the daily charts.
But.. let’s call a spade a spade. Trading on the daily charts is not exciting for most traders. Especially when compared to some intraday trading strategies.
The daily chart is slow and boring. And since a daily pattern won’t turn into a position into a 100% winner, many traders ignore this chart
Daily chart trading requires a ton of patience for the trader to sit there and wait for their positions to work out for them.
And, it can have fewer trading opportunities compared with other strategies.
But that’s where they are wrong!
Just by following my unique daily chart momentum strategies, you too will have the excitement to trade this otherwise boring time frame.
And I’ll explain how exactly the daily chart is one of the easiest to use for a trader, and can even those expensive lower trading fees!
The truth about the daily timeframe
Did you know that trading the daily time frame can offer many benefits that are not found on lower time frames?
Trading the daily time frame gives you many opportunities that other intraday traders typically dream about.
5 reasons to trade the daily timeframe:
- Trading the daily time frame is less stressful
- News events don’t matter as much
- You decide how long to sit trading each day
- Slower charts help you to focus on process
- Stacks the odds in your favor
Let’s take a look at how trading the daily timeframe out-performs intraday strategies.
1. Trading the daily time frame is less stressful
Let me ask you this:
Have you ever traded the 1-minute time frame?
If you have, then you are aware of the stress level that comes with trading such a fast time frame.
With a new candle being formed every minute – you need to pay attention to new charts and candlestick patterns that are being created.
You’ve got to make decisions, every minute, to buy…sell…hold… or even stay out of the markets.
This means as a trader on a 1-minute time frame, you have far less time to process information than a trader on higher time frames.
Potentially causing you to make poor trading decisions, such as chasing the markets, and revenge trading, doubling down, etc.
On the other hand…
If you trade the daily timeframe, a new candle is formed every 24 hours.
You inherently have more time to think, plan, and execute your trades… accurately!
You will be far less prone to making the wrong trading decision when you have more time to review your trades.
What does this mean?
The better the decisions you make means the more money you generate for your trading business.
2. News events don’t matter as much
I hate it when news breaks…
Then it causes hard stops to be triggered…
And just to sit and watch the market go in the direction without me.
Talk about a triple whammy.
Here’s the thing…
When you trade on the lower time frames, news events (FOMC, Jobs Reports, etc.) are a big thing.
You’ll notice that price goes “crazy” and flies all over the place on your chart.
Here’s a sample job report on a 1-minute time frame:
As you can tell, the chart looks intense, with prices near the highs of the day at 2 pm to tumble to the lows of the day shortly after the news announcement was released.
This means that if you were to trade the lower time frames, such as the 1 minute, you must be aware of the news or you’ll get stopped out from your long trade for nothing.
If you trade the higher-level time frames, such as a daily time frame, you’ll hardly even notice this price movement.
Here’s an example of the same event on the SPY on the daily time frame:
Notice how there is only a small red candle that day?
Chances are you’ll still be in this trade long on the daily timeframe.
…and if you were trading a lower time frame, you would have been stopped out already.
So, if you trade the higher time frames, the less impact news has on your trading.
Pro tip: If you want to trade the lower time frames on days there are news announcements, be sure to move your hardtops to the daily level time frame to prevent being caught in the chop.
3. You decide how long to sit trading each day
Many traders think that when they hear about trading the daily bars, there is “nothing” to do.
Unfortunately, this is a myth.
Truth be told – it is as much (or as little) trading as you wish on the daily charts. It just comes down to the trade frequency and trade duration a trader wishes to use.
There are many ways that a trader can utilize a daily chart to work with an intraday trading strategy.
Let’s take a look at two examples of how to use the daily bar to day trade the markets.
One strategy is aiming to capture the pre-market activity and utilize it to trade the open on the markets.
This strategy is great for momentum because it can get you in before the rest of the market identifies what is going on.
How does it work?
It’s best to focus on the 5 and 10 EMAs on the 5 and 15-minute chart and look for signals that the market is going to be moving from momentum once it opens.
Pro tip: This strategy works great in trending markets where a lot of pre-market price action follows through past the opening of the trading day.
The next strategy is called my overnight installment trade.
This pattern is where I aim to use the daily bars price action to determine the momentum for the overnight trading session and even the next day’s bar.
How does it work?
This is where reading price action, volume analysis, and technical analysis patterns become important.
For example, If there is a strong market intraday with heavy volume and shows a bull flag continuation pattern.
This combination signals that there is a high probability the markets will continue throughout the extended trading session and the following day.
These setups are great to pick up a trade towards the end of the day in order to hold it overnight and sell the next day.
4. Slower charts help you to focus on process
This is important…
Many new traders get caught up in the “excitement” of pressing buttons with their new trading software.
Little do they realize, this quick trading just chews up commissions and ends up with traders “overtrading” the markets.
Why does this happen?
Well, it typically happens for one main reason, they need to make money to pay the bills.
Many traders that go into the markets with the “need to make money” syndrome, unfortunately, end up failing.
This is typically from breaking the principle trading rules by over trading and forcing trades or widening your stop losses to avoid taking a loss.
But say, you are trading the daily time frame.
The two strategies you would use are taking an opening momentum or overnight installment with the closing momentum.
The chances are you won’t break any of the principle trading rules by limiting your trading to a higher time frame with a less frequency of trading.
And even if you have losing months, it’s not the end because your draws will be limited to once a day, instead of 20 (or more) times a day for an active intraday trader!
This means you have more time in the game, and you are able to focus on perfecting your strategy and learning the markets.
Don’t you think slowing down will actually help you become a profitable trader faster?
5. Stacks the odds in your favor
One of the biggest reasons why traders fail is because they don’t pay attention to the transaction costs of their business.
And this can easily be the difference between a winning and losing trade.
Let’s see why…
An account with $10,000 in it with a transaction cost of $10 per trade.
If you place 500 trades per year from day trading, your costs are $5000!
That means you need to return 50% just to break even on your trading!
But… What about trading on the daily time frame?
An account with $10,000 in it with a transaction cost of $10 per trade.
If you place 50 trades per year from trading the daily bar, your costs are $500!
Now you only need 5% returns to break even instead of 50%!
What a huge difference slowing down your trading can make.
So you want to put the odds of winning in your favor? Start by slowing down and trading the daily chart with fewer transactions.
So the daily bar trading might sound boring, and maybe it is.
But there is nothing wrong with slow and steady since trading is a marathon, not a sprint!
And in order to actually grow as a trader, it’s best to slow down and focus on a few specific strategies with less trading.
That is what was seen in the two key techniques for trading the daily bar.
To recap – here’s what was covered ….
- The benefits of trading a daily time frame
- You can adapt an intraday or an overnight strategy based around momentum
- Daily charts help you focus
- Trading a daily chart stacks the odds in your favor