Quote from Cutten:
Here's some tactics I use for intraday swings:
1) Relative strength/weakness:
Look at several related markets e.g. ES/NQ/YM; T-bond, T-note, 2-year; CL/NG etc. Sometimes you will notice one of them is acting stronger (or weaker) than the others. The rallies will be bigger and faster, the dips will be shallower, it will lead the next up move by breaking out first etc. What you do is concentrate on long setups in that market - so if the complex is pulling back, you buy the (mild) dip in the strong market. A particular refinement of this is if the markets are testing a support level, usually the weaker markets will make a new low, whereas the stronger market will sometimes not actually penetrate that low. You buy the strong market when it is a bit above the low and the other markets have broken it. This gives you a close stop and usually pretty good odds of catching a reversal. You can also try spreading the strong vs weak markets, although I prefer outrights.
2) Strong reversals.
Example: the market is in a powerful downtrend, having pullbacks but mostly they are fairly shallow and quickly fail. Eventually the trend will experience a much bigger counter-trend move, with far more powerful buying, and which goes a lot higher than normal trend pullbacks. Now you have your setup - wait for that strong pullback to reverse, and buy at the 40-60% retracement area. E.g. if the ES falls from 1350 to 1336, with 2-3 point retracements, then you get a move from 1336 to 1344, you would look to buy within a point or so of the 1340 level. Your stop is the prior low. Sometimes the retest will go close to the lows, here I like to double up (keeping a stop close at new lows). If this trade works you can often catch a *large* subsequent new trend, getting in near the beginning of it.
3) Fading capitulation.
I don't know of any objective way to identify capitulation, but with experience you can normally recognise it. Usually it occurs after a fairly large, strong move, often one that has either just broken an important high or low (e.g. high of the week, yesterday's high etc) and then moved far enough to make everyone fading the move give up and cover; or a move that has gone parabolic and seen a major acceleration in price change. You need to be able to sense that "give up". Sometimes it occurs in conjunction with stops being triggered. If you have a position already, you must exit here, and it is usually a great reversal setup too. You can either try and "anticipate" the reversal, and average in (requires good timing, patience to avoid entering too early, and some balls) or wait for the reversal, then hop on board the new trend (easier with less risk but less profit-potential).
4) Riding powerful intraday trends.
Most days aren't trend days, so this is a less common strategy. You want to see obvious evidence of much more powerful buying (or selling) than normal. High volume, big bids lifting the offer etc. Then, just hop on board and use a much wider than normal stop. Buy more on all normal retracements, and stay long your core position (you can exit some at new highs if the move gets extended, just to reduce risk & book profits) until you get capitulation. It is a bit like an intraday version of trading a long-term bull market. The key is to identify the unusually powerful underlying strength, and then have sufficient balls/conviction to buy more into all normal dips, and not just exit for the sake of it. In the ES, days with this action are usually 20-30 point moves or more.
5) Trading news
This can be a bit tricky, but you can employ all the techniques above and overlay it with the news that has just come out. News, especially if a surprise, will often trigger a large trend and/or a major reversal. Particularly useful are when you get bullish news but the market rally quickly fails, then moves back significantly *below* the price before the bullish news came out. This indicators a "buy the rumour, sell the news" reaction and will often result in a BIG move down. Just use your typical trend-following approach (MAs or whatever) and hold on to the close if you do not get any exit signal.
So, those are my main tactics for intraday. I have found that trying to "guess" direction, use normal indicators, or all the other favourite approaches just don't work. Either they lose outright, or you breakeven minus commissions. I prefer to wait for the higher probability setups.
