16 Apr 3 things to help pinpoint your trading entries
I've received a lot of questions about how does one know when to pull the trigger on a trade? Of course, this is a pretty broad question; however, if I were to condense it down to a few "indicators", they would have to be the following:
1. Market Direction/Levels
Here's a shot of my screen which I use to gauge intraday "inflection" points in the market. I like to look at the daily pivot points in the futures and see when certain levels hold or break. I also like to use this to find "laggards" - meaning that if one or two indices break a certain level, which index is soon to follow, then I can use this as a guide to where the stock/sector I'm trading might be headed.
2. Level 2
This is a big one. You need to see the orders on either side of the security or option contract to know what is going on. Using only a chart can be very misleading sometimes. For example, a chart might show that a level is breaking higher or lower; but when you look at Level 2, you see that it was just a very small order that filled above/below that level - which is more-or-less a "fakeout". You can find my article about Level 2 here which goes into more depth.
Of course. Look for volume surpassing prior levels. Also, going back to Level 2, you want to match this volume on a chart with amounts of sell/buy blocks in the Level 2 screen.
4. NYSE $TICK
Here's one that not many people watch or know about. Here's a definition from Investopedia regarding this "Tick Index":
The NYSE $TICK indicator is the number of stocks trading on an uptick minus the number of stocks trading on a downtick. Tick index is a popular indicator used by day traders to view the overall market sentiment at a given point in time.
By being able to easily see the ratio of "up" stocks to "down" stocks,
traders can more easily make quick trading decisions that are dependent
upon market movement.
I like to use the $TICK (on a 5-minute time frame) when it hits extremes on either side, then enter my position in the opposite direction. So if the $TICK hits the upper Bollinger band, that's when I like to enter short, if it hits the lower band, I like to go long.
Using the $TICK in this manner, it gives the trade a little extra push in your favor right out of the gate.
I hope this helps. I go into more depth on each one of these topics in my video course. Check it out!