Scalpers Trade Lesson: Know The Intra-day And Daily Chart Trend
Many traders and investors have simply been buying the dip every time the stock market declines. This method has worked because the daily chart trend is up. As long as the daily chart remains up the buying the dip method will work. However, day traders or scalpers must deal with two trends and this makes day trading a much more skillful endeavor. Day traders or scalpers must watch and know the daily chart trend plus the trend of the intra-day time frame that they may be using to find support or resistance.
The day trader should know that a bounce is very likely at strong intra-day support levels despite the intra-day trend being down as long as the daily chart trend is up. As a scalp trader or day trader we can buy the strong intra-day support level for the small bounce. However, it is important to remember as a scalper we just look to take a small bite or chunk out of the stock. Once we are in the money on the trade we move our stop loss to break even to protect against a loss. We never want to get greedy when trading unless we are in the money and have already secured a gain.
If the daily chart trend is down then the scalper must be much more careful trying to trade the intra-day bounce area. In fact, the scalper might be better off trying to sell the bounce short if the trend is down on both the daily and intra-day charts. Scalpers must also always know where the stop loss area will be just in case the stock does something unpredictable. Remember the old market adage, “markets can do anything at anytime.”