In the A Deep Dive into Gap Trading Strategies webinar by Mark Holstead he has a section on trade triggers which is an area I really need to work on.
A trigger is the candle that signals a good point to place the trade.
At the moment I mostly wait for the price to get to the 20EMA and then place a trade at the first candle or so that goes in my direction. I hesitate to take trades when it doesn’t pull back to the EMA, some of these might be good for those occasions.
Opening Range Breakout
Create a range after the opening, say the first 15 minutes (exact time up to you). The trade is placed when the price breaks out of that range – above if the market is moving up, below if it’s moving down. So when the price breaks above the high (or low) of the first 15 minutes place a long (short) trade.
Prior Candle Break
For this trigger you wait for the price to break the prior candle’s low (i.e the price goes lower) and then for the price to move back up to the low. The trade is placed at the point it reaches the prior low. For a short trade the reverse would apply, i.e. wait for price to break the prior candle’s high.
Reversal Candle
If the price action is moving strongly upwards, wait for the first red and enter the trade when that red candle’s high is broken.
Trendline Break
As in the previous trigger the price is moving upwards but it then creates a short trendline. The trade is taken when this trendline is broken to the high side.
High Break
If the price is moving up, wait for it to form a new high and then pull back (‘pullback a decent amount’ he says). The trade is placed on the next break upwards i.e when the price goes above the high that was made. The reverse would apply for a Low Break.
And here are some more triggers:
- Wide Range Bar – e.g. the biggest bar there has been for the past 10 minutes
- Outside Bar
- Inside Bar
- Pin Bar
- A Candle That Closes Above (or Below) a Key Level