In day trading one of the most important attributes of a trader is the ability to quickly change your bias. This mental skill is paramount for any intraday trader, and this is exactly what we will talk about in this blog post.
In the current market environment, the one we have been seeing for the last few weeks, an asset is likely to reverse its trend multiple times each weak, and we have seen that first had. An asset that is strong one day could become weak the very next day or even trading session, this is why it is essential to know how to recognize these changes quickly and act on them.
The example we will use is XAUUSD, the best chart to focus on to find key resistances when day trading would be the 1H chart and combine it with a minute chart for execution.
Our team started paying attention to XAUUSD from Wednesday because we noticed that volume is starting to rise after a very weak first two trading days of the week. We also noticed that potential patterns could be forming hence we added it to our watchlist, since Wednesday there have been buying, selling and then again buying opportunities, based on the short-term trends seen in the first image below.
In our Trading Hub report, released 2x times a day, before the London & New York trading sessions begin, we release our watchlist and the reasons the assets are in those watchlists. If you join us, the Trading Hub will be of supreme value to you.
As you can see, XAUUSD (Gold) has since the start of December '21 moving up, then down and high up on Friday. For a day trader it is imperative to know what the market could be doing and quickly, very quickly, change direction from long to short and from short to long, because the ultimate mission for us day traders is to make a profit, and to make it today.
Finding key rejection levels
Since every trade will always be different there are different ways to anticipate a reversal area, in the below example we show you previous rejections areas where strong and heavy buying occurred after the bears tried to move price action south.
These areas become vital price levels in which we believe that buyers could take over or a complete breakout can occur. The levels are dangerous to trade simply via the 1H hour, this is why we use MTFA (Multiple Time Frame Analysis) to determine if we should take a long, or hold the shorts when price comes to these levels.
Finding price action patterns (Head and Shoulders)
As a special addition to the key support levels, we also had the chance of building a reversed head and shoulders pattern on the 1H chart, which we seem to have completed on Friday which now increases the chances of XAUUSD breaking above in the new week, and there could be many reasons for this bullish breakout, Covid, US/Russia tensions, US/China tensions and rising inflation!
Completing multiple time frame analysis
If we zoom into the 5 minute chart of XAUUSD, we see the that price action has been forming a roundting bottom right at the support level and where the right shoulder of the reversed head and shoulders pattern should be.
Further to all of this, we also this have a fib retracement (on the 1H) where price hit the 30% price level and started moving up after the CPI data.
PrimedTraders Day Trading System:
Finally we're here... the entry! :)
Our day trading system has given us a buy signal on XAUUSD a little before the actual news came out. The three things that line up perfectly here are
The ATR support level
Price action pattern (rounding bottom on 5M, reversed head and shoulders on 1H)
Complete system execution for longs
The chart speaks for itself, and if you want to learn this simple system, just press here and we'll teach you exactly how you too can trade like us and our community traders!
The point and key lesson we watch to educate you on this blog post is that you always need to be proactive, always trading what you see and being just as ready to buy as you are to sell, let your mission be profit not "correct" analysis/predictions. (opinions don't make money, execution does).