Sheila Olson

Opening Range Breakout (ORB) is a particular price action that is taken to be an indicator to enter into a trade. The Basics
The fundamental elements of an ORB trading strategy are best demonstrated by taking an equity market with typical trading hours of 08.00 -16.30. The high and low price levels of stock ABC are recorded over the opening five minutes (08.00 – 08.05) and in our example the high during those five minutes is 78.54 and the low price is 77.26. Any price action after 09.05 that takes the price over 78.54 is seen as an ORB breakout to the upside and is considered a signal to buy. The principle is applied in the same way to a breakout to the downside where a new lower price below 77.26 would be a signal to sell. Time horizon: Positions are typically held intra-day so are sold prior to market close; apply Price Action Rules. Stop losses: Buy trades would have stop-losses set at the low of the current day and sell trades would have stop losses set at the high of the day. Target price: 2:1 or 3:1 ratio to stop loss cost. Supporting Signals
Catalysts: The occurrence of some kind of news event that is seen as a catalyst for the break out is seen to be supporting the signal to trade. Overnight Gap: The difference between the previous day’s closing price and the current days opening price should be considered. If stock ABC had a previous closing price of 76.74 and opened trading at 09.00 at a higher price (77.72) then the overnight Gap was ‘bullish’. In our example, a bullish overnight gap in ABC supports the ORB signal to buy. An ORB signal that is in the opposite direction to the Overnight Gap means you are being given mixed signals and would discourage entering into a trade. Volumes: The greater the trading volumes, the stronger the trading signal. Diagnostic tools supplied by broker platforms will offer the chance to monitor volumes. In the below example the breakout candle is to downside and is associated with a sizeable uptick in volume. The signal to sell is borne out by the price continuing to fall during the rest of the trading day. Source: IG Index 20181113 Variations
The example we chose is fairly simple and explains the fundamentals of the strategy but of course there are a range of factors to consider which will improve understanding and thereby hopefully improve profitability. Time intervals: Our example used 5 minute time intervals. Whilst this is a popular choice other trader use others such as 1, 15, or 30 minutes. Other events: Any diarized event that is likely to bring about increased trading volumes can be used as a base for trading ORB. Major reporting events such as the release of US Non-Farm Payroll data will generate spikes in trading volumes. Summary
The theory behind OBR is that markets are busier at certain times of day and therefore price movements during those times are an indication of wide-held sentiment and therefore give an indication of future price direction. ORB trading strategies are widely known, are intuitive in nature, and to some extent self-fulfilling. If for example the price of a stock follows the required pattern to trigger an ORB trade on the upside, then the associated widespread buying will push the price upwards. Even if you are holding back on actively trading an ORB strategy it is worth understanding how they work thereby avoiding the risk of unknowingly betting against them.

Daily Pivots are a price level indicator calculated using the previous day’s price data. The Daily Pivot for today’s trading is calculated by calculating the mean average of the: Previous Day’s High Previous Day’s Low Previous Day’s Close The Daily Pivot is a tool you might want to use to construct a trading strategy. If you find you side with some of the arguments questioning the usefulness of Daily Pivots, it’s still valuable to monitor them as certain market participants do give them credence. The below chart of the CFD price action in SEB shows how the Daily Pivot is calculated. Source: City Index Demo Account 20181113 Classic Trading Strategy
One established method of trading the Daily Pivot is to monitor price action for the first 15 minutes of the day and if it is below the Daily Pivot to trade into a short position and if the price is above the Daily Pivot then to trade into a long position. Holding periods would be intra-day, and there would be scaling out of positions at the Support Levels or Resistance Levels depending on whether you are trading long or short. Your Stop Loss levels would typically be set just the other side of the Daily Pivot. The theory behind the Daily Pivot trading strategy is somewhat self-fulfilling. The Daily Pivot is a well-known analysis tool that has been around for a long time. Even if you are not basing your trading activity on the Daily Pivot, you are still likely to benefit from knowing where it is and understanding its impact on price action. The fact that some other market participants will be trading using the Daily Pivot means it is important to monitor. Questions
While the Daily Pivot is important, you might be questioning the benefit of risking your capital trading strategies based around it. Take time to step back and consider the significance of the three data points chosen to calculate it? How useful are they as determinants of today’s price action? Why not include the previous day’s Opening Price? Why not only consider two data points, namely the previous Day’s High and Low? The truth is that some traders do use methods with different data points. It’s fair to conclude that Daily Pivots must have worked pretty effectively at some point. Any method of making profits in the market soon gains a loyal following. You have to draw your own conclusion on the significance you’ll place on Daily Pivots. Even if not completely convinced by the methodology the role of the Daily Pivot needs to be acknowledged and might at least be tested by trading a Demo account. Pivot points can be applied to different time intervals. Weekly and Monthly Pivot points are calculated using the same method, for example: Monthly Pivot = mean average of (Previous Month’s High + Previous Month’s Low + Previous Month’s Close) A yearly or monthly Pivot might even be running through your intra-day charts and explain particular price action.

When you make the leap into day trading, it’s all too common for negative emotions such as frustration and self-doubt to hit you, not to mention the biggest enemies of day trading, fear and greed. So, how can day traders deal with negative emotions so that they don’t negatively impact trades? The key is to treat your day trading like a business. You need to have a plan and to follow it. It should contain specific goals and include daily activities that will keep you from focusing on those negative emotions when they occur. The trader who does this is far less likely to make decisions based on emotion and is far more likely to become successful. Five Tips for Controlling Negative Emotions
Increase your trading knowledge. There’s always something new to learn about trading, and you should schedule time each week to study a course on a new trading strategy, read a book about technical indicators or find videos that explain how to trade credit spreads. Dig in and do research. There’s almost always something happening in markets that needs an explanation. If there aren’t any good trades take time and dig deep to learn why markets are behaving how they do. Paper trade! The only way to test new indicators, strategies and ideas is to paper trade them. Even if you’re already a successful trader, you can always learn more from paper trading. And the act of trading will bury those negative emotions. Write or rewrite your trading plan. If you don’t have one now is a great time to write a trading plan. And if you have one you should revisit and revise it each month based on any new knowledge or experience. Analyze some completely new charts. Maybe you focus on tech stocks. That’s fine, but diversification is good. Pick another sector like energy, pull up some charts and analyze them carefully, noting reasons to go long or short. This analytical thinking helps calm and remove emotions from your trading.

When you make the leap into day trading, it’s all too common for negative emotions such as frustration and self-doubt to hit you, not to mention the biggest enemies of day trading, fear and greed. So, how can day traders deal with negative emotions so that they don’t negatively impact trades? The key is to treat your day trading like a business. You need to have a plan and to follow it. It should contain specific goals and include daily activities that will keep you from focusing on those negative emotions when they occur. The trader who does this is far less likely to make decisions based on emotion and is far more likely to become successful. Five Tips for Controlling Negative Emotions
Increase your trading knowledge. There’s always something new to learn about trading, and you should schedule time each week to study a course on a new trading strategy, read a book about technical indicators or find videos that explain how to trade credit spreads. Dig in and do research. There’s almost always something happening in markets that needs an explanation. If there aren’t any good trades take time and dig deep to learn why markets are behaving how they do. Paper trade! The only way to test new indicators, strategies and ideas is to paper trade them. Even if you’re already a successful trader, you can always learn more from paper trading. And the act of trading will bury those negative emotions. Write or rewrite your trading plan. If you don’t have one now is a great time to write a trading plan. And if you have one you should revisit and revise it each month based on any new knowledge or experience. Analyze some completely new charts. Maybe you focus on tech stocks. That’s fine, but diversification is good. Pick another sector like energy, pull up some charts and analyze them carefully, noting reasons to go long or short. This analytical thinking helps calm and remove emotions from your trading.

Price Action is simply the recorded prices of an asset over time. It shows how price has moved. A liquid asset will have a PA that can expressed using various chart types and in all instances the source data is the same, just expressed differently.   The two charts show representations of the same intra-day PA of Copper Futures. PA provides a record of how supply and demand have interacted to enable transactions to take place.  The indisputable nature of this data providing a solid factual record from which traders using technical analysis try to extrapolate where price will go in the future. Price Action forms part of technical analysis.  It’s generally used in conjunction with other indicators but Price Action is the basic starting point. So, you know what price an asset traded at but what are these really saying about the market?  More importantly how can the PA give a signal that the market is going to trade in one direction or another? Most traders trying to answer those questions use candlestick charts like those the chart below. This shows Copper Futures over the same time period as before.  Green candles are where the price at the end of the one minute time period closed higher than the start of that minute.  Red shows the opposite.  The real body shows the opening and closing prices and the tails the total range of PA in that minute. Already we see that over the last twelve minutes of Copper Futures PA, all candles are red. The blue trend lines on the below chart show one kind of technical analysis strategy that is used when trading Price Action. The downward channel is taken to signify a downward trend and a signal of further bearish PA. Trading that downward trend pattern would have turned out to be profitable.  You could have set your stop-losses somewhere above the higher trend line and indeed tightened them as PA continued down.  At some point you’d be a ‘free’ trade where your stop losses are at your entry level and able to let the position ‘run’ and even if the market turns against you still break even. How do you know if the signal was correct?  For starters you’ll likely see the position making money but PA can also be used to give Confirmation signals.  Confirmation is when after the initial signal is given (to enter a trade) the PA moves over a particular price level to ‘confirm’ what was expected to happen is indeed doing so. Price Action is the purest and most basic element of technical analysis.  Studying historical price action and ‘what happened next’ gives a lot of traders some kind of reassurance that they can read the markets.  It’s certainly prudent to analyse PA but long term profitability will depend on what other tools you incorporate into your analysis.

Stochastic is an indicator created by George Lane in the late 1980’s. It indicates when an asset is overbought or oversold. It can also indicate an impending breakout or trend reversal.
Stochastic explained
There are a few variations of stochastic,but in Lane’s original version it contains two lines. The first of the lines is called %K. The second is called %D. %K is calculated by taking the highest high and lowest low of a preceding time period and defining a range using those values. Within this range, the price is then expressed as a percentage of its distance from the bottom of the range. A %K of 50% indicates that the price is in the middle of its current range. A %K above 80% indicates that the price is near the top of its range. A %K below 20% indicates the price is near the bottom of its range. The time-period used to define the range can be any number. In the original version, the previous 14 periods were used to define the range. Many stochastic indicators today use a 5-period range instead of a 14-period one. %D is calculated by taking a 3-period moving average of %K. In the original version, this is a “slow” line that is smoother than %K. Crossovers between these two lines are used as buy and sell signals. Many modern versions of stochastic do not show %K at all. Instead, they show %D and a second line that is a 3-day moving average of %D. Regardless, most variations of stochastic have two lines, and crossovers of these lines are used as signals.
Stochastic example

The chart above uses a hidden %K defined by a period of 14 days. The two lines that are shown are a “fast” sea-green line and a “slow” dotted red-line. In this chart, we can see that the stochastic for USD/CHF fell below 20% in late August, 2018. This implies there was strong downward momentum. In late September, the fast (sea green) line crossed the slow (dotted red) line from below and both lines moved above 20%. This move was accompanied by a widening of the distance between the two lines. After this signal occurred, the price moved from 0.96596 to 1.01095, a gain of over five hundred pips. From late September to mid-November, stochastic stayed above 80%. This indicated strong upward momentum. But in mid-November, the fast line crossed the slow line and both lines moved below 80%. In addition, the space between the lines widened. This indicates that a trend-reversal may be occurring.
How to trade using stochastic
There are strategies that traders can use to take advantage of the information provided by stochastic. Here are a few:
When stochastic is above 80%, consider it “overbought.” Look for chances to go short. When stochastic is below 20%, consider it “oversold.” Look for opportunities to go long. When stochastic crosses over and moves out of oversold condition, buy the pair. When stochastic crosses over and moves out of overbought condition, sell the pair. When the price is going up and stochastic is going down, this is a “divergence.” Sell. When the price is going down and stochastic is going up, this is a “divergence.” Buy.  The stochastic indicator is a measurement of the momentum of price over a given period of time. It can be used to identify overbought and oversold conditions, catch breakouts, and find impending trend reversals. It’s an excellent tool to find profitable Forex trading opportunities.

Stochastic is an indicator created by George Lane in the late 1980’s. It indicates when an asset is overbought or oversold. It can also indicate an impending breakout or trend reversal.
Stochastic explained
There are a few variations of stochastic,but in Lane’s original version it contains two lines. The first of the lines is called %K. The second is called %D. %K is calculated by taking the highest high and lowest low of a preceding time period and defining a range using those values. Within this range, the price is then expressed as a percentage of its distance from the bottom of the range. A %K of 50% indicates that the price is in the middle of its current range. A %K above 80% indicates that the price is near the top of its range. A %K below 20% indicates the price is near the bottom of its range. The time-period used to define the range can be any number. In the original version, the previous 14 periods were used to define the range. Many stochastic indicators today use a 5-period range instead of a 14-period one. %D is calculated by taking a 3-period moving average of %K. In the original version, this is a “slow” line that is smoother than %K. Crossovers between these two lines are used as buy and sell signals. Many modern versions of stochastic do not show %K at all. Instead, they show %D and a second line that is a 3-day moving average of %D. Regardless, most variations of stochastic have two lines, and crossovers of these lines are used as signals.
Stochastic example

The chart above uses a hidden %K defined by a period of 14 days. The two lines that are shown are a “fast” sea-green line and a “slow” dotted red-line. In this chart, we can see that the stochastic for USD/CHF fell below 20% in late August, 2018. This implies there was strong downward momentum. In late September, the fast (sea green) line crossed the slow (dotted red) line from below and both lines moved above 20%. This move was accompanied by a widening of the distance between the two lines. After this signal occurred, the price moved from 0.96596 to 1.01095, a gain of over five hundred pips. From late September to mid-November, stochastic stayed above 80%. This indicated strong upward momentum. But in mid-November, the fast line crossed the slow line and both lines moved below 80%. In addition, the space between the lines widened. This indicates that a trend-reversal may be occurring.
How to trade using stochastic
There are strategies that traders can use to take advantage of the information provided by stochastic. Here are a few:
When stochastic is above 80%, consider it “overbought.” Look for chances to go short. When stochastic is below 20%, consider it “oversold.” Look for opportunities to go long. When stochastic crosses over and moves out of oversold condition, buy the pair. When stochastic crosses over and moves out of overbought condition, sell the pair. When the price is going up and stochastic is going down, this is a “divergence.” Sell. When the price is going down and stochastic is going up, this is a “divergence.” Buy.  The stochastic indicator is a measurement of the momentum of price over a given period of time. It can be used to identify overbought and oversold conditions, catch breakouts, and find impending trend reversals. It’s an excellent tool to find profitable Forex trading opportunities.