TRADING PROCESS DETAILS

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The trading process starts in premarket. It is best to set your key levels before the opening bell. I set the premarket high and premarket low by drawing a horizontal line at each of these levels. I then look for 5 minute double tops and double bottoms. I then draw a horizontal line at these levels. As you will see, these levels will give you key targets throughout most trading days. These levels will act as support and resistance throughout the trading day. 

Figure 1: 5 minute  premarket and regular chart with high, low, double tops and double bottoms. (premarket is in brown)

Pay close attention to the 5 minute in premarket as it will show the expected first move after market opens. The 9 SMA is in blue and the 20 SMA is in red. Because the 9 is below the 20 going into open, we should only be looking for puts (or going short) when the market opens. 

Figure 2: 1 minute premarket and regular chart with high, low, double tops and double bottoms. (premarket is in brown)

Because I execute all of my trades based on the 1 minute chart, I switch to the 1 minute chart before the market opens. Once the market opens, I’m paying close attention to what is going on with both the 9 and 20, as well as what price action is doing relative the 9/20 and support and resistance. 

Figure 3: 5 minute premarket and regular hours with high, low, 5 minute double tops, and double bottoms (premarket is in brown)

Notice that the premarket trend is going up. Going into open, we will only be looking for calls. 

Figure 4: 1 minute premarket and regular hours with high, low, double tops and double bottoms. (premarket is in brown)

Notice that trend reversals will become clearer by looking at the 5 minute chart. Higher time frames give you a different perspective on where the market is going. Always trust what the chart is showing you. Also pay close attention to the fact that premarket levels will, oftentimes, be strong areas of support and resistance throughout the trading day. Always do your best to follow the trend. Countertrend trading can be lucrative, but it’s important to realize that following the trend will help stack the probabilities in your favor. Remember, trading is based on probabilities.