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1. Chart Pattern Day Trading Transcript
1. Title Slide
2. Good day traders this is Roger Scott from Market Geeks with another trading
tutorial for you today. Before I begin I want to remind you to subscribe to our
video channel for day trading videos and don’t forget to visit marketgeeks.com for
your free trading report.
3. Often times chart traders who make the transition to day trading from swing
trading look for pattern day trading set ups that worked for them in the past. The
problem is many chart patterns that worked for short term traders do not apply or
will not work for day trading because many technical patterns such as head and
shoulders or cup and handle can take months to set up correctly and may require
a holding period of several day or even more once you enter the position after
the pattern completes.
4. I'm going to show you a few patterns that tend to work just as well or better when
used for intraday trading as opposed to swing trading or other longer term trading
methods. What's really great about these patterns is they are formed using daily
chart patterns, so traders who are familiar with daily chart pattern analysis will
feel right at home making the transition to day trading.
5. The channel breakout is one of the most popular day trading strategies. You
simply find a stock or other market that has been in a trading range for at least 2
weeks. You start monitoring the market and wait for a breakout. You can see
how a Channel Breakout Pattern sets up in this example.
6. After you find a good range bound channel, you should monitor it daily prior to
the opening bell. As soon as the stock breaks the channel you would enter your
order. In this example you can see a good breakdown to the downside. You
would place your stop loss $0.05 above the entry bar and take profits at the close
of the day. You can use MOC or Market on Close orders to that you don't have to
sit and watch the market all day. Your entry would be $0.05 cents below the
lowest price reached during the consolidation period.
7. You can see the entire sequence on this chart. I only use intraday charts once I
isolate the pattern on the daily chart. I typically have both charts placed next to
each other so I can see how the pattern is turning out on the intraday time frame
and daily time frame at once. I could have gained more by getting out early, but
statistically holding stocks till the end of the day produces the best risk to reward.
8. Another very effective pattern for day trading is the triangle pattern. It's effective
for two great reasons. The first reason is the triangle consolidates and tightens
as the pattern gets closer to ending. This is a great low risk entry opportunity
level for traders who want to risk as little as possible while day trading. The
second reason why the triangle pattern works well for day trading is because
when triangles breakout they are typically accompanied by very strong volatility.

2. Here is a good example of a Triangle pattern that works very well for day trading.
9. The best type of breakouts from Triangle patterns are accompanied by gaps. You
should make this a rule when day trading Triangle breakouts. Notice how the
stock gaps up and continues moving with very little retracement. This is the type
of momentum you want to see when day trading Triangles.
10. You can see the entire sequence in this particular graph. Don't be afraid of a big
gap, it's a strong confirmation that you are on the right track. The entry should
take place immediately after the open when the stock gaps up. You would place
your stop loss level a few cents below the low that day and the stock should not
turn back. The exit is MOC so you don't need to monitor the position during the
day too much.
11. Lastly, one of my favorite day trading set ups is the Tail Gap Strategy. I use this
strategy often for swing trading as well as day trading and here's a good example
of a set up that occurred few days ago. Keep in mind two important things when
trading this strategy, the gap has to go against the main trend and the trade has
to go with the main trend. I use 10 day lows against the trend when looking for
Tail Gap Set Ups.
12. You would place a buy stop order $0.05 cents above the previous day's high
price. If the trade doesn't get triggered within the first hour and half of the trading
day I would cancel the order. There would be not enough time for the trade to
develop if you are day trading and entering orders too late in the day, especially
with stocks. Place your stop loss order $0.05 cents below the entry day low. The
stock should not come back to that level and if it does the trade doesn't have
enough momentum to continue.
13. You can see the entire sequence in this example. Notice that we did not enter
right at the open but waited till the stock rallied a few ticks above the previous
day's high price. This is a good test to make sure there is sufficient momentum to
make the trade worthwhile. Always place your stop loss order a few cents below
entry day low and place your profit target at as a MOC or Market on Close Order.
14. Keep in mind that some chart patterns work better for day trading than others.
Make sure you carefully monitor the pattern and use the daily time frame analysis
to make sure the pattern develops properly. Stick to a few good patterns that
produce a good risk to reward ratio.
15. Thanks for joining us for today’s day trading tutorial. Don’t forget to subscribe to
our video channel and visit MarketGeeks.com for your free trading report.
Wishing you the best from Market Geeks.
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