Day Trading: Zone Trading Analysis

Breakout and counter-trend trading has been the most popular and successful day trading mechanism for many, many years. Basically, it tries to capture big trend days through breakouts and counter-trend moves through intraday reversals. If the market were to constantly break higher or lower and continue, then day trading would be like an ATM.

Unfortunately, the market brings chaos into the mix and has breakouts and false breakouts and market congestion. As long as the wells were alive and well, the locals could use simple math to determine the price levels at which the markets could turn and reverse course or if these levels were entered with some level of enthusiasm then a trade was being set up. of impulse. These levels were labeled as individual support and resistance levels (like the ones on the chart above). A resistance level is a price that the price should have a hard time crossing above, and a support level is one that the price should have a hard time crossing below.

Combining momentum and countertrend mechanisms into a single strategy has been around since the 1980s. Richard Saidenberg together with John Ehlers/Mike Barna created very successful day trading systems with names like R-Breaker, R-Levels, and R- Table. Many other traders used the same concepts and also created very successful algorithms; some leaned more on breakout or countertrend entries. Initially, the success of these algorithms lay in the crowd mindset, as many day traders in the pits and in front of screens were looking at the same thing simultaneously – it was a self-fulfilling prophecy. However, as more merchants started using these tiers, the magic faded. These levels became traps and the strength of this day trading approach faded.

Still, the synergy of the breakout and countertrend approach was still a great approach and the only game in town. Traders began to derive their own levels and timed entries and exits based on the markets’ interaction with these levels. Many traders incorporated risk measures by monitoring daily volatility and derived potentially higher probable trades by overlaying daily bar patterns.

Biblioteca Apoyo Daytrading - Quantified Models

Other related products

Herramienta de Trading - Forbidden Patterns Tool

Forbidden Patterns Tool

Take your investigation to a whole new level with this powerful tool. This tool allows you to define a pattern and then analyze all of its possible permutations.

Herramienta de Trading - Quantitative Seasonality Tool

Quantitative Seasonality Tool

The key to universal seasonality was that it was a seasonal advance. You cannot use the results in a backtest of the period in which you are trying to discover seasonality. The correct way to study seasonality is with a pure seasonal dynamic of advance.

Herramienta de Trading - Data Magician Tool

Data Magician

This utility is designed to export your TradeStation data to CSV files. This powerful utility not only exports the data, but also all the information needed to complete the attributes.ini file. This file is what TradeStation uses to configure settings when data is imported as third-party data.

Herramienta de Trading - Intermarket Edge Tool

Intermarket Edge Tool

Intermarket system creation toolkit. Standard cross-market correlations are not useful if our goal is to predict future prices or generate profitable signals because the current correlation tells us nothing about future prices.

Subscribe to our Newsletter

Join our mailing list to receive the latest news and updates from Quantified Models team.

Subscribe to our Newsletter

You have Successfully Subscribed!

Skip to content