Things have been crazy busy at work. My already very satisfactory earnings rate looks like it is going to double for the foreseeable future. The cost, of course, is there is less lime to do other things, such as market analysis, short term trading, and posting. Perhaps when I have time to trade again, my account will have been upgraded to a portfolio margin account.
Although I am unlikely to be able to post during the week, I hope to be able to use part of my "recovery" Sundays to post general ideas on trading.
I believe there is a lot of good information in daily candlestick charts for daytraders and weekly candlesticks for swing traders using options. The previous day's and week's high, low, and close tend to be significant support or resistance zones. Round numbers and intraday highs and lows also have been known to be meaningful support and resistance areas as well.
When combining the general principle of "Trade in the direction of the opening indicator" with sentiment analysis such as money flows to and from risk based assets, put to call ratios, and market sentiment statistics, one should be able to construct a sound trading plan for a day trade. By trading in the direction of the open, I mean to favor long entries when the daily candle is green or favor short entries when the daily candle is red during the regular trading hours of the session you are interested in. There appears to be solid statistics to support this idea. Look at daily and or weekly charts and consider the open to close range (candle body) as well as the wick by the opening end of the candle. One can also download open, high, low, and close data into a spreadsheet and analyze it that way.
However, when there are significant gaps, one must exercise judgement weather to trade in the direction of the gap, fade the gap, or wait. This takes experience where one would consider the context of the underlying trend on the daily chart, if any. For example, let's say a daily chart shows generally rising prices with several days of narrow range price declines. On the current trading day the issue gaps up. The odds generally favor paying this markup for a rally to test and perhaps eventually exceed the previous high of a few days ago. Use the opening indicator as a guide for timing your trade.
Now let's say prices have been in a strong uptrend for a while. On the current trading day there is a large gap up. If prices trade below the open and one has the discipline to excercise money management should prices trade back through the open by a meaningful amount against their position, there is a good chance prices will "fill the gap" from the previous day. The opening price can act as a pivot and putting stops a little distance beyond the opening price can be an effective trade management tool.
I am also exploring option trades for swing trading. These strategies focus on the current week and thus use options that expire and the end of the current week. I will be looking low initial delta strategies with theta decay and gamma considerations as appropiate to my underlying expectations for the week. The could involve outright long options or some type of option spread such as verticals, butterflies, ratio spreads, and strangles or straddles. I believe the greatest "efficiency" of a option trade is obtained when it's PnL curve profile is similar to a probability bell curve as adjusted to one's statistically validated trading edge.
