Day Trading RANGE BREAKOUT STRATEGY In 5 Simple Steps - (Intraday Trading Breakout Strategy) 🔥🔥

Day Trading RANGE BREAKOUT STRATEGY In 5 Simple Steps - (Intraday Trading Breakout Strategy) 🔥🔥
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    - [Instructor] Welcome to the video on Day Trading Breakout Strategy In Five Simple Steps. This tutorial is part of Intraday Trading Strategies for Beginners Video Series. In this series, we will be learning about intraday trading strategies and short-term trading in detail. In this video, I will be showing you five simple steps which will help you execute trades on intraday basis. This intraday strategy is very simple to use and once you practice this enough, you will be able to take trades on your own. I will be releasing one more intraday strategy after this video and then I will move to explaining these with trades I take in my own account. Again, my focus is to keep things as simple as possible. Trading strategy explained here is something you can learn today and start practicing it from Monday. So let's get started. First step that we will discuss is about advance decline and its importance in this intraday trading strategy. Now advance decline is one of the most important data points that you should track as an intraday trader. More often than not, this is not looked at as a decision-making data point. Rising values of advance decline Ratio tend to indicate a bullish market and falling values tend to indicate a bearish market. I will come to advance decline rules for intraday trading in a couple of slides. Now The concept of rising tide lifting all boats is very much applicable to Stock market as well and this is what advance decline represents. On a day when money inflow is high and most of sectors and stocks participate, it is much easier to identify an intraday trade than when there is no activity in the broader market. Most of the strong trending days if you see, come on back of sessions where broader market participation is clearly evident. These are the days when intraday trading is much more easy and profitable. The important question here is, how to get advance decline data in real time and for free. This data point is available on NSE website and I have marked the same on the chart. I will leave a link to this page in the comments section below and in the description box below. Even many brokers provide this information for free and hence do check the same with your own broker. Let me now come to why advance decline is perhaps the most important indicator that one should look into while trading on an intraday basis. In this chart in front of you, I have posted advance decline ratio on the horizontal axis and number of stocks trending on the vertical axis. From this chart, it is very clear that as advance decline ratio rises, number of stocks exhibiting clear trend rises as well. This means broader market plays a huge role in overall trend of respective stocks. Now this information in my opinion will change how you trade on intraday basis. This is mainly because we are only looking to trade when odds of success is much higher. Being an intraday trader does not mean you trade every single day. It means you trade when you feel the conditions are apt to take a trade. What I have observed is that when advance decline ratio is below 0.6, one should avoid trading on the long side. Also, best intraday trades come about when advance decline is between 1.5 and 2.2. Let us now move to specific rules when it comes to advance decline ratio and intraday trading. When advance decline ratio is between 0.1 and 0.3 and trend is down, always prefer to short sell for the day. When the ratio is between 0.3 and 0.5 and trend is down, prefer short selling and be nimble in booking profits. Don't assume that you can keep positions till end of day. When the ratio is between 0.5 and 0.8 and trend is either up or down, avoid taking any trade. Wait for further clarity in the market. When advance decline ratio is between 0.8 and one and trend bias is up, take long trades but be ready to book profits as this is still weak up trend. When the ratio is between one and 1.5, take long trades as this is an indication of strong up trend. And when the ratio is between 1.5 and 2.5 and the trend is up, take long trades and don't be in a rush to book profits. This indicates strong trend for the day and you should stay with your positions. Now these are the broad guidelines that you have to follow at all times in intraday trading. Second step that we will discuss in this intraday trading strategy is that of price range on the chart. Unless and until range is clear on chart, there is no point taking a trade. In technical analysis, trading Range is one of the safest strategies to execute. This is mainly because range represents balance in market and when price moves out of this balance, trending moves usually develop. As an intraday trader, this is what you need to focus upon. In the chart in front of you, I have marked out various price range on the chart. As you can see, range can be horizontal or at an angle. As far as price is consolidating between two price regions, you can mark those as range. As an intraday trader, you will have to develop a routine where you mark out potential price range on stocks you are interested to trade in. This has to happen before the market opens as this will help you prepare better for the next day. Along with advance decline step, this step of marking out ranges is extremely important as well. Therefore, have a limited stock watchlist and on those stocks, mark out price range on a five-minute chart. You can mark it out on time frame you prefer, but I do these markings on a five-minute time frame chart. Third step that we will discuss in this intraday trading strategy is that of timing of breakout and context of breakout. Now in our markets, there are two breakouts that are very common. The first one is between 9:15 am and 11 am and the second one is between 2 pm and 3 pm. As an intraday trader, you need to identify which one you would prefer. I for one trade both kinds of breakouts. Let me explain this why it is important to understand this. Now in the chart in front of you, breakout of range happened at approximately 2 pm. During this time, advance decline ratio was at 1.18. If I see breakout happening late in the day, I would know that price would move with momentum and I would have to be alert in order to book profits on the trade. At 2 pm, one has roughly 1.5 hour of trading activity left and hence there is not much time in terms of letting the positions continue. I would know that at any sign of weakness, I should be in a position to book out on profits. I have also observed that success of breakout is a bit lower in the afternoon session than when you compare it in the morning session. This may be because morning session breakout does have lot of time on its side in terms of when the market closes. The bottom line here is, if you are trading the afternoon breakout, be nimble and be ready to take your profits aggressively. When the afternoon breakout works, price moves with momentum and hence knowing when to take profits is equally important. In this chart in front of you, this is an example of price breaking out in the morning session. Now in morning session, it is much easier to plan out your trade as you can position size better as price moves in the direction of trend. In the afternoon session if you see, it is not possible to add to your existing positions, mainly because you have limited time in your hands due to market closing in the next one to 1.5 hours. Now in my own trading, I am more inclined to trade the morning breakout session. This is mainly because I can take advance decline data into consideration along with other steps, we will discuss in next few slides, and then plan out my trade based on underlying momentum in price. Since the introduction of weekly options, I have observed that in Nifty and in Bank Nifty, afternoon breakout is more common during expiry session. Also keep note of one day before expiry session because these are the times when afternoon breakout is more prominent. Now this is an important data point to consider because as more and more weekly options are introduced in stocks, this principle will hold true in the stocks segment as well. So when you trade in the morning session, you can let your positions be with the trend and when you are trading the afternoon session, always keep note of when you have to book profits on your trade. This is the key difference which every intraday trader should be aware of. Let us now move to context of breakout. Now by context of breakout, I mean if price is breaking out, how near it is to the previous resistance level. If you look at this chart in front of you, both these breakout have happened near previous resistance regions. Now whenever I spot something like this on a chart, I refrain from taking that particular breakout trade. Always remember that whenever previous resistance region is close to the current breakout region, price is going to find it difficult to move above the previous resistance region. If momentum is indeed strong and price does move above the previous resistance region, then you should go ahead and initiate the trade. Now in my own trading, I always look out for clean charts. What I mean by this is that, whenever I am aiming to trade breakout, I like to trade only those stocks where previous resistance level is not visible at least over the next two to three sessions. Let me explain this with an example. So in this chart in front of you, if you look at the breakout here, now this is happening where there is no previous support region present on the chart over the previous two to three sessions. If you see, this breakout chart is more cleaner than the one we saw in the previous slide. Now these are the kind of breakout trades that I personally like to target in my own account. If I am short selling, I don't want to see any previous region of support for at least two to three sessions and in case I am taking a long trade, I don't want to see previous region of resistance over the last two to three sessions. I hope this particular point is clear. Always remember that whenever you spot previous resistance or support region, price will always find it difficult to penetrate that. Therefore, always target cleaner charts as your odds of success in intraday trading would increase a great deal. Fourth step that we will discuss in this intraday trading strategy is that of short-term relative strength trend. Now as a rule of thumb, if I am taking a long trade, I would like to see the relative strength trend for the last two to three sessions on the upside. on the flip side, if I am taking a short trade, I would like to see relative strength trend for the last two to three sessions, on the downside. Now this way, I would be taking long trades in only those stocks that are outperforming the broader market and I would also be taking short trades in only those stocks that are currently underperforming the broader market. Now this way, when I am buying into a stock, I will be buying into strength and when I am short selling a stock, I will be short-selling into weakness. Now too many intraday traders, don't use relative strength as a decision-making tool. Now in my opinion, relative strength is one of the main indicators that will always make sure that you're trading on the right side of the market. Now in this particular example, I would ignore the first breakout on the chart because relative strength line is clearly sloping downwards. If you look at the remaining three breakouts, these breakouts I would trade, as relative strength line over the last two to three sessions here is clearly sloping on the upside. I hope this particular point is clear. Fifth step that we will discuss in this intraday trading strategy is that of price volume trend. Now I had explained in the previous videos that whenever price breaks out, volume should expand in the direction of trend. If expansion of volume is missing, then always doubt the breakout that you see on the chart. Volume clearly reflects the commitment of participants in stock market and therefore, whenever volume is high, participants will be more committed in holding their positions. This is something you can observe across all time frames that you trade. In this chart in front of you, as price moves higher, look at what has happened to volumes. Now as price moves up, there is no expansion of volume that you can spot here on the chart. As an intraday trader, always seek confirmation in form of expanding volumes. So, let me now explain the concept of how to book profits with this breakout strategy. Now within this, we will be taking consideration of price volume trend, in order to identify the regions where we need to sell existing long positions. So, what I have observed over the years is that clear trending charts have three sets of volume expansion. The first set of expansion is when you enter the trade. Second set of expansion is when price and volume remain strong and you should be holding onto your existing trades and third set of volume expansion is a sign of booking profits in the trade. This price volume pattern plays out on intraday basis and also over two to three sessions and hence you can use this as an exit strategy. In cases where this pattern does not play out, I will discuss about exit strategy towards the end of this video when I cover entry, exit and stop loss separately. In this chart in front of you, this price volume pattern did play out over two to three sessions. Again, this is a very powerful pattern and hence do take a note of this. In this chart in front of you, you again see this price volume pattern playing out. First volume expansion is when you enter the trade, second expansion is an indication to continue with existing positions and third expansion in volume is to book profits on existing trades. When you are selecting stocks to trade, make sure volume expansion is in play. In this particular intraday strategy, we would want volume to expand as price moves out of the range. If price moves out of range and volume does not expand, then don't enter the trade. Most likely, trade will fail going ahead. Let me now cover all the steps in an example where I will cover entry exit and stop loss for this intraday trading breakout strategy. This way, you will be in a better position to practice this on your own. Step number one is identification of a trading range. This is where prices is in a range and is consolidating for at least one to two sessions. For stock selection in this strategy, you will have to refer to the previous video I did on intraday trading. I will post the link to that video towards the end of this video and in the comments section below. Now once stock is selected, you then need to identify a clear range on the chart. Range can be horizontal in nature or can be in form of any technical pattern, that is a triangle, rectangle, or a flagpole formation as well. Step two is when the actual breakout happens in price. Now when price breaks out of range, take the nearest swing low and mark that as a stop loss for your trade. In this particular example I have marked out the stop loss for the trade. When breakout happens, this is where you have to check for advance decline ratio data. If advance decline criteria is fulfilled, then you have to go ahead and initiate a long trade after the breakout. Now some of my favorite sectors for this strategy are banking and financial services, metals, commodities and realty sector. All these sectors are high beta sectors and whenever most of the conditions that we discuss here are fulfilled, trade usually works in your favor and yields good amount of profits. Now once the breakout happens, step three is to check for the relative strength trend for the stock. If relative strength line is trending up over the past two to three sessions, only then prefer entering this stock. If the current trend is not clear, move onto another stock where relative strength line is clearly sloping on the upside. You have to remember that in intraday trading, time is against you and you have to enter stocks that are trending higher and exhibiting more strength than broader market. This is the only way you will increase your odds of success in intraday trading. Over the weekend, I usually make an excel sheet of all stocks that are showing strong relative strength over the past two to three sessions. This way, when the next week begins, you already have a list of stocks where you have checked all these criterias before. This saves incredible amount of time on the day of trading as all information you need is organized in a ready-to-use manner. Fourth step that you have to consider here is checking for volumes as price moves out of the range. If price moves out of the range and volume does not expand, then do not take the trade. This is a very vital step here and hence always take note of this. Now in my own trading, I pay a lot of emphasis on relative strength and volume. These are the two conditions that I always want the stock to fulfill before I initiate a long trade in it. Fifth and last step before taking the trade is to check for context of break out. if you look at the example here, as price was breaking out, there was no relevant resistance level present in the last two to three sessions. Now in the step one, we discussed about stop loss for the trade and now I will explain a bit about entry and exit. Now entry is pretty straightforward and as price moves out of the range, this becomes your entry point for the trade. I have marked the same on the chart. Exit condition for the trade however is based on multiple conditions. If advance decline is in the strongest of regions, then you have to make sure that you give time to your trades and this means, you should be holding them till the end of the day. If advance decline reading is not that strong, then you have to simply follow structure of higher high and higher low on a five-minute time frame chart. This means, you have to hold the position till a valid pivot is breached on the downside. In the chart in front of you, I have marked out two pivot points as an example, and if any of these pivot points were to breach on intraday basis, that is when you have to exit your trades. Let me now explain this with an example. Now in this example in front of you, price forms a range here and there is no preceding resistance that you can see on the chart. Now once breakout happens, look at how volumes expand and at this point of break out, this becomes your entry region for the trade. Now as price moves higher, I have marked out relevant pivot points on the chart and at around 3:15 pm, if you look at the candle here, this relevant pivot point is breached on the downside and hence this becomes your exit point on the chart. In this example, we can also see the three-volume expansion pattern playing out on intraday basis. Therefore, third expansion in volume can also be used as a valid exit strategy. If you see, this strategy is extremely simple and it is probably known to millions of traders out there. The key however to succeed in this strategy is knowing when to take the trade. The conditions of advance decline, volume, relative strength, and three volume expansion pattern increases the odds of success in your favor by a huge margin. This is something most traders don't follow in their own trading routine. As you will practice this, you will learn a great deal about when to enter and when to exit. In the end, it comes down to practice and efforts you put in to succeed. After the next video on opening range breakout, I will be posting a lot of examples on how I will be executing trades based on the methods explained here. I'll probably focus only on two intraday strategies and will then show you step by step as I take trades in my own account as to how you can master this on your own. Always remember one thing that for all your doubts, I am always available and I answer each and every comment that is posted on my video. So kindly consider hitting the like button and sharing this video if you find the content useful. Thanks a lot for watching this video guys. Take care and be safe.
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