Inside Day Trading Strategy (2024)

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The Inside Day Trading Strategy - How it Works

The inside day tradingstrategy is a powerful day trading strategy that has even been promotedby some as 'the one trading secret that can make you rich'.

Thestrategy is primarily based around stock trading, i.e. buying and selling shares of company stocks, but it could just aseasily be adapted to more leveraged financial instruments includingfutures and spot forex trading.

If you're in a country whereContracts for Difference (CFDs) are allowed, you could also use inside days there.CFDs are not available from US brokers but brokers in othercountries such as Australia and the UK allow CFD trading on US shares.

It is primarily a 'scalping' strategy, designed to take advantageof short term price consolidation followed by a subsequent breakout ineither direction. Once the breakout occurs, you enter at a predeterminedprice point, take profits and exit shortly after.

Do this enough times aday by locating enough stock trading opportunities while the market isclosed - and providing you have sufficient capital (or leverage) to makethe necessary trades, you can easily bring in about $400 per day -almost on autopilot.

What is an Inside Day?

To begin with, inside day trading involves identifying what an"inside day" actually is. Once we've done that, we then need to apply asimple but strictly observed set of rules for entrance criteria, stops,trade management and finally, exit rules.

Historically speaking, inside day trading using the correct setof rules has a 90 percent success rate. For the remaining 10 percent,you simply set your stops at predetermined levels and take small losses.The maximum stop loss must never be greater than the range of theinside day that indicates the setup.

An "inside day" always reveals itself by the appearance of aspecific bar or candle on a daily chart the day after a preceding bar.

It willgenerally be a day with a narrow trading range and the critical factoris that it has a 'lower high' and 'higher low' than the previous day. Toqualify for inside day trading, the range of this bar must be not morethan 50 percent that of the preceding bar.

It is important that inside day trading should only be considered forhighly liquid stocks. You need to be able to have your orders easilyfilled without slippage.

Setting Up Your Automatic Orders

Once you have identified an inside day trading opportunity, youthen draw a 'channel' across the peak and trough of the inside day. Youthen set your entry points at one cent above and below of the channel.

You should use a 'one cancels another' (OCO) type order for this, sothat whichever way the stock breaches the channel, one trade will beentered and the other cancelled. If the stock breaks above the channel,you automatically 'go long' the stock; if it breaks below, you 'go short' the stock orderivative as the case may be.

You then set your stops at one cent above or below the opposite end of the channel that your order was filled on.

After this, it is simply a matter of managing your trades bycalculating and setting profit targets. The simplest and mostconservative profit target is the range of the inside day added to thetrade entry price.

There are however, more advanced exit strategieswhich are slightly more involved.

This inside days strategy is a powerful short term trading tool.Trade setups are easy to identify and entry points can be preset beforethe market opens, so you can have quite a number running at one time.With preset stop losses and profit taking points, you can then just letthe market "do its thing" and reap the rewards.

If you would like to know more about trading inside days, thereis a video and .pdf document explaining the system in more detail,included among the bonus files that come with the very popular Trading Pro System.

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