What is the best bearish technical setup for day traders?

[Jane Goodwin]

[Steve Walters]

Day traders often focus on rising markets, but it’s also important to know what the best bearish technical setup is for day traders. These bearish setups can make up a good part of your trading strategy, and even if you prefer going long, it’s still an excellent idea to learn the best strategies for going short if you want to make the best profits. So, what is the best bearish technical setup for day traders? We believe it is the bearish opening breakout. It doesn’t matter what the broader market is doing, even if it’s bullish or moving aimlessly sideways, you’ll always be able to find morning breakouts. Breakouts are when price gaps first thing in the morning on higher than usual volume. These breakouts are almost always news related. There are rules you’ll want to follow when finding and trading morning breakouts. The first obvious rule is that the stock gaps down on higher than usual volume. Once you pass that rule wait for the stock to consolidate, usually between 9:30 am and 9:50 am. Following the consolidation wait for a break below the low of the day which should occur between 9:50 am and 10:10 am. When you enter the trade be sure to have a profit target in mind and a stop-loss. A 2% stop is normally good, while we typically relate the profit target to the volatility of the stock. So a move in a volatile tech stock like Tesla would have a larger profit target than a move in a stable stock like Exxon. Finally, you’ll want to get out of the trade around 11:00 am and no later than 11:30 am. We give the time references to make sure you stay focused on executing this trade rapidly. It’s called a morning breakout not only because it begins in the morning but also because it unfolds and is most profitable in the morning. These trades evolve quickly, and by 11:00 am many of the institutional traders are moving out of the market for meetings and lunch. Without them in the market volume drops dramatically, so you need to get in and get out fast, which is really what all day trading should be.

[Rishabh Tyagi]

There are plenty of candlesticks and chart patterns that help anticipate a potential decline in the markets.

I'll share mine.

Mine is the range breakout.

1. A stock trading near resistance and moving sideways.

2. Buyers are failing to take it up to the support.

3. And then a support breakout. That would be the trigger to plan a short.

For a stock in a downtrend (forming lower lows and lower highs), it becomes much easier to find shorting setups.